Structural

Tourism in the Northern Ireland Economy

Volume 1

March 2007

i

2 Headlines Θ The total income generated by Tourism in 2003 was worth some 3.5 per cent of Gross Value Added (GVA) or £783 million to the Northern Ireland economy when assessed according to internationally recognised standards. Θ However, only about a quarter of this was due to visitors from outside Northern Ireland (0.9% of GVA or £199 mn) with the rest being accounted for by Northern Ireland residents on day visits (£406 mn), overnight stays (£82 mn), owning holiday homes (£19 mn) or spending money in NI in connection with outward travel (£77 mn). Θ External visitors' contribution to the Northern Ireland economy (0.9 per cent of GVA) is the lowest of the countries of the UK or Ireland. Θ In total, some 36 700 jobs are supported by resident and non resident tourism activity (28 700 Full Time Equivalent) with about one quarter of these accounted for by out of state visitors. Θ Direct value added from tourism (£423 mn, which excludes the supply chain and indirect spending) is 1.9 per cent of total Northern Ireland GVA. This amount is about four­fifths of the GVA arising from the Agriculture sector in Northern Ireland (£575 mn) in 2003 reflecting a similar importance to the economy. Θ The unfulfilled potential of the tourism industry in Northern Ireland reflects the fact that it lost some three quarters of its global market share of incoming visitors at the start of the Troubles. It currently gains barely a fifth of the out of state visitors to the island of Ireland, whereas before the Troubles it reached almost two fifths of all­island inbound tourism. Θ The research also indicates we have between 5­7 per cent of the non resident holiday visitors and half of the business visitors from Great Britain that a country of Northern Ireland's size and economy would warrant. There is also significant potential to attract visitors from the Republic of Ireland. Θ Since the mid 1970s, tourism has nevertheless grown, following the global trend to increased travel and leisure, and has contributed about 8 per cent of the total real economic growth of Northern Ireland. Θ Nevertheless, if Northern Ireland had matched external visitor trends in the Republic of Ireland since 1969, tourism income (GVA) from this source would be expected to be worth an additional £270 million in 2006, or more than 11 000 jobs. The extra sales to generate this would be of the order of £400 mn. Θ In order to regain this share it would need to grow in real terms at 14 per cent per year over the next 10 years or 9 per cent over the next 20 years. In contrast, average growth in external tourism spending has been 3.6 per cent in real terms over the last 5 years. Θ How fast Northern Ireland returns to its true market share potential will be due in large part to the quality of the tourism product on offer. World class attractions and accommodation will be necessary to increase holiday visits by non­residents and this in turn is likely to require considerable investment to achieve the accelerated growth necessary. Θ While leisure day visits by Northern Ireland residents have traditionally not been considered an integral part of tourism it is clear they have an important role to play in sustaining the vitality of the tourism industry and in making Northern Ireland a more attractive place to live and work.

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4 Table of Contents

TABLE OF FIGURES ...... 7 INTRODUCTION...... 9

EXECUTIVE SUMMARY: TOURISM IN THE NORTHERN IRELAND ECONOMY ...... 12

POTENTIAL FOR GIANT STEPS: THE ROLE OF TOURISM IN THE NORTHERN IRELAND ECONOMY –EXECUTIVE OUTLINE ...... 13 The market and demand...... 15 Inbound tourism ...... 15 Day visits...... 16 What tourists demand ...... 16 Business and economics ...... 18 Tourism industries ...... 18 Growth ...... 18 The supply chain...... 19 Methods & further details ...... 20 Data sources ...... 20 Tourism satellite accounts...... 20 Social accounts and input­output tables for Northern Ireland...... 21 Find out more...... 21 MEASURING TOURISM: A NEW APPROACH ...... 24 Tourism Satellite Accounts ...... 24

PART ONE: THE TOURISM MARKET IN NORTHERN IRELAND, TOURISM SPENDING AND MARKET SHARES ...... 26

1. THE MARKET OVERALL ...... 27 2. INBOUND VISITOR SPENDING ...... 28 Global market perspective...... 29 Northern Ireland tourism in a time perspective ...... 32 Comparisons with elsewhere ...... 33 Spending by type of purchase...... 35 Transport...... 37 Three main inputs from outside ...... 37 3. SPENDING ON TOURISM IN NORTHERN IRELAND BY NORTHERN IRELAND RESIDENTS...... 41 Patterns of spending...... 43 Second homes...... 43 4. OUTBOUND TOURISTS ...... 44

5 PART TWO: SUPPLYING TOURISTS AND THE TOURISM INDUSTRY IN NORTHERN IRELAND...... 46

5. CONTEXT: THE GROWTH AND STRUCTURE OF THE NORTHERN IRELAND ECONOMY48 6. INDUSTRIES’ TOURISM SALES, VALUE ADDED AND EMPLOYMENT ...... 53 Imports ...... 54 Demand on NI industries ...... 55 Hospitality industries ...... 56 7. GVA COMPARISONS...... 61 8. COMPARISONS OVER TIME...... 62 9. DIRECT GVA COMPARISONS ACROSS REGIONS ...... 64 10.SUPPLY CHAINS, MULTIPLIER EFFECTS AND THE WIDER ECONOMIC IMPACTS .....66 11.DIRECT EMPLOYMENT ...... 69

PART THREE: DEVELOPING TOURISM: SOME OPTIONS SUGGESTED BY THE STATISTICS...... 72

12. RETURNS TO TOURISM INVESTMENT AND DEVELOPMENT...... 73 Example 1 – Conference Complex ...... 73 Example 2 – Short break promotional advertising ...... 75

PART FOUR: TOURISM SATELLITE ACCOUNTS ...... 79

TSA Table 1: Inbound tourism consumption, by products and categories of visitors...... 81 TSA Table 2: Domestic tourism consumption, by products and categories of visitors...... 82 TSA Table 3: Outbound tourism consumption, by products and categories of visitor...... 83 TSA Table 4: Internal tourism consumption, by products and type of tourism...... 84 TSA Table 5: Production accounts of tourism industries and other industries...... 85 TSA Table 6: Domestic supply and tourism consumption, by products .87 TSA Table 7: Employment in tourism industries ...... 88 TSA Table 10: Non­monetary indicators...... 89

13. REFERENCES ...... 90 14. TERMS OF REFERENCE...... 93

6 Table of Figures

FIGURE 1 MARKET OVERVIEW ...... 27 FIGURE 2 COMPOSITION OF INBOUND TOURISM SPEND ...... 28 FIGURE 3 REAL INBOUND TOURISM SPENDING IN NI 1959­2005 ...... 29 FIGURE 4 GLOBAL INTERNATIONAL TOURIST ARRIVALS, VISITORS BY CONTINENT ...... 29 FIGURE 5 INDEX OF INTERNATIONAL TOURISM SPENDING 1950­2005...... 30 FIGURE 6 NI SHARE OF GLOBAL INTERNATIONAL TOURISM 1959­2005 ...... 32 FIGURE 7 SHARE OF OVERSEAS VISITORS TO IRELAND 1960­2004...... 33 FIGURE 8 COMPARISON OF NI AND ROI OUT OF STATE VISITOR NOS 1960­2005 ...... 34 FIGURE 9 PURCHASES OF INBOUND TOURISTS ...... 35 FIGURE 10 DAILY PURCHASES OF INBOUND VISITORS BY PURPOSE OF TRIP ...... 36 FIGURE 11 TRANSPORT MODES REPORTED BY VISITORS AND ESTIMATED SPENDING ...... 37 FIGURE 12 SKYSCRAPER DIAGRAM OF INBOUND SPENDING BY PURPOSE & PURCHASE ...... 38 FIGURE 13 INBOUND VISITORS’ ACCOMMODATION SPENDING BY VISIT PURPOSE ...... 38 FIGURE 14 INBOUND VISITORS’ ENTERTAINMENT SPENDING BY VISIT PURPOSE ...... 39 FIGURE 15 INTERNATIONAL CONNECTIONS FROM BELFAST AIRPORTS ...... 40 FIGURE 16 NI RESIDENTS’ SPENDING IN NI BY VISIT TYPE...... 41 FIGURE 17 NI RESIDENTS’ TOURISM SPENDING IN NI BY PURCHASE ...... 43 FIGURE 18 VALUE FLOWS IN NI TOURISM ...... 47 FIGURE 19 NORTHERN IRELAND REAL GVA 1967­2004...... 48 FIGURE 20 THE COMPOSITION OF GVA 1971­2003 ...... 49 FIGURE 21 COMPOSITION OF UK/NI GVA 2003: 30 INDUSTRIES ...... 50 FIGURE 22 UK REGIONS’ HOUSEHOLD INCOME PER HEAD OF POPULATION, 2003 ...... 52 FIGURE 23 PRODUCT PATTERN OF TOURIST PURCHASES ...... 53 FIGURE 24 IMPORTS TO MEET TOURISM DEMAND ...... 54 FIGURE 25 TOURISM DEMAND ON NI INDUSTRIES ...... 55 FIGURE 26 COST STRUCTURES IN NI HOSPITALITY INDUSTRIES ...... 56 FIGURE 27 HOSPITALITY SECTOR REAL GVA GROWTH ...... 57 FIGURE 28 GROWTH IN ACCOMMODATION CAPACITY ...... 57 FIGURE 29 EMPLOYEES IN THE HOSPITALITY INDUSTRIES ...... 58 FIGURE 30 SOURCES OF BUSINESS FOR THE HOSPITALITY SECTOR ...... 59 FIGURE 31 RATIO OF OVERNIGHT VISITOR SPEND TO HOSPITALITY GVA 1972­2004 ...... 60 FIGURE 32 COMPOSITION OF NI GVA 2003 ...... 61 FIGURE 33 HOSPITALITY GVA AS % OF TOTAL GVA: UK AND NI 1971­2004...... 62 FIGURE 34 HOSPITALITY GVA %GE – NI, UK, SCOTLAND AND ROI ...... 63 FIGURE 35 TOURISM DIRECT GVA AS % OF TOTAL – UK REGIONS AND ROI 2003...... 64 FIGURE 36 TOURISM VS HOSPITALITY GVA – UK REGIONS AND ROI ...... 65 FIGURE 37 B2B SUPPLY CHAIN FOR TOURIST SPENDING...... 66 FIGURE 38 JOB CREATION RATIOS...... 67 FIGURE 39 INDUSTRIES IN THE SUPPLY CHAIN ...... 68 FIGURE 40 REAL GVA PER JOB IN HOSPITALITY INDUSTRIES , 1971­2004, UK AND NI...... 69 FIGURE 41 VALUE FLOWS IN NI TOURISM...... 70 FIGURE 42 ASSUMED EXPENDITURE PATTERN – CONFERENCE VISITORS ...... 74 FIGURE 43 JOB CREATION FROM A SUCCESSFUL ADVERTISING CAMPAIGN ...... 77

7 Table of Tables

TABLE 1 SPLIT BY PURPOSE: UK, SCOTLAND AND NI VISITS ...... 34 TABLE 2 TOURISM MULTIPLIERS ...... 67 TABLE 3 DIRECT JOBS SUPPORTED BY TOURISM...... 69 TABLE 4 IMPACT OF STIMULATING OVERNIGHT TOURISM...... 76

NOTE: THE NUMBERING SYSTEM FOR THE TSA TABLES IS STIPULATED IN THE RECOMMENDED METHODOLOGICAL FRAMEWORK. WE HAVE NOT PRODUCED TSA TABLES 8 (INVESTMENT) AND 9 (GOVERNMENT CONSUMPTION) IN THIS PROJECT.

8 Introduction The purpose of this report is to set out the current economic role of tourism in the Northern Ireland economy and in particular to estimate the economic impact of tourism in terms of its wider contribution to the economy, using methods of measurement that are consistent with best international practice. This report is intended to be of use both to those with an interest in and concern for the economy of Northern Ireland and to those with an interest in the development of tourism. This introduction is followed by an executive summary and a short note on the new international methods used for measuring tourism, the Tourism Satellite Account, TSA, tied to the system of national accounts. Thereafter the report falls into three parts: The first part is concerned with the size of the market and with spending by tourists. It discusses the present market size, the past evolution, and the detailed make­up of major market segments, where segments are defined by the origin of the tourist and the purpose of the visit. Part of the necessary background is the world tourism market, whose rapid growth has been driven by increases in affluence and reductions in transport costs. There has been a shift in products consumed and UK suppliers have progressively achieved a smaller share of the rapidly growing market. In Northern Ireland’s case one of the special factors considered is the impact of the Troubles on market share, almost 40 years ago. The new measurement methods significantly change the way in which the supply of tourism goods and services is analysed, which the second part of the report addresses. It deals with the supply side of the industry, looking at the hospitality industries including accommodation, restaurants and bars, transport, the travel trade and attractions. For each of these segments the importance of tourist as opposed to non­ tourist demand is examined, in order to form a view of the structure, conduct and performance of the producers. To set this in perspective there is discussion of the historical development of the Northern Ireland economy since the late 1960s, and its current structure, drawing on comparisons with the rest of the United Kingdom. The report then goes on to consider the supply chain for tourism and other aspects of its CCCrrruuuccciiiaaalll sssttteeepppsss iiinnn wider economic impact, and illustrates the possible impact mmmaaannnaaagggiiinnnggg tttooouuurrriiisssmmm (and therefore return on investment) from some tourism development projects.

9 The third part of the report deals with issues which have arisen out of the economic and statistical analysis, including closer examination of the market potential to recover, the orientation of “tourism” provision and its integration with culture and leisure in the domestics market, and the role of the public sector in addressing current and historic market failures. The report concludes with a formal set of Tourism Satellite Accounts. Two further reports are being issued in conjunction with the present one: a more detailed statistical description of the Tourism Satellite Accounts and the methods used to construct them, and a set of Social Accounts and Input­output Tables for Northern Ireland. It was necessary to construct the latter in order to develop the TSAs, but this was a large undertaking with applications far beyond the realm of tourism, so they merit separate publication. The majority of the work was undertaken during 2006, when the latest data available to create an adequately detailed picture of the entire Northern Ireland economy covered 2003, so 2003 was taken as the reference year.

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11 Executive Summary: Tourism in the Northern Ireland Economy

12 Potential for Giant Steps: the role of tourism in the Northern Ireland economy –executive outline A new study commissioned by the Department for Enterprise Trade and Investment and the Northern Ireland Tourist Board applies the latest international methods to trace the role of tourism through the economy of Northern Ireland. It concludes that Northern Ireland lost three quarters of its international market share in tourism at the start of the Troubles, and that under­investment over nearly forty years has left the industry with only a fraction of its potential capacity, particularly when it comes to holidaymakers and business visitors. The demand on NI tourism industries from Northern Ireland’s own people has grown, while switching from local overnight stays to day trips, a trend which has also occurred in other places. The consequence is that the prosperity of hospitality and other tourism industries hinges critically on the day visitor; and also that efforts to improve the tourism offering are likely to have an impact on the general quality of life for everyone in Northern Ireland. The legacy of the Troubles means that despite substantial natural advantages, Northern Ireland’s tourism industry is smaller in relation to its economy than any other region or country in the UK. There is an opportunity for a substantial step upwards in tourism Gross Value Added as potential visitors increasingly realise that peace has returned. The total spent by tourists in Northern Ireland in 2003 (the latest possible base year for the study) was £1278 mn. Of this total about one quarter was spent by incoming visitors from ‘out of state’, representing ‘exports’ for Northern Ireland. The largest category of ‘within state’ spending was day tourists (people away from home for at least three hours), with the remainder made up of people from Northern Ireland staying at least one night outside their usual environment, and outbound tourists going somewhere else, but spending money on their way or in anticipation of their trip.

Tourism spending of £1278 mn ­ the overall picture Domestic spending of outbound tourist 8% Domestic overnight tourists Second homes in NI 10% 2% Out of state same­day visitors 2% Out of state visitors to friends and relations 9%

Out of state holiday visitors 3%

Out of state business Domestic same­day leisure visitors visitors 9% 56% Other out of state visitors 1%

Source: NITSA Ref P195 /2003/nitsa42003/ch1

Tourism spending helps to support a wide range of industries. Most of the goods that tourists buy directly are imported, but almost all the services are domestically produced. The Gross Value Added in industries that directly supply tourists is 1.9 per

13 cent of the Northern Ireland total, lower than any other part of the UK and significantly below the Republic of Ireland figure of 3.4 per cent. If we count the supply chain and the impact of tourism and related employees spending their incomes, the proportion of GVA rises to 3.5 per cent. The diversity of services that tourists use and the depth of the supply chain means that there are many sophisticated linkages between the tourism economy and the rest of the economy, with the supply chain including not only services but some of Northern Ireland’s competitive goods­producing industries including agriculture, food and tobacco.

Northern Ireland must take giant steps to regain its historic market share

Northern Ireland is only the second part of the UK (after Scotland) to publish its tourism performance in a full set of Tourism Satellite Accounts. ‘TSAs’ are a new internationally agreed framework designed to allow tourism to be looked at alongside other industries in the economy for the purposes of strategies for business or policies for public bodies.

14 The market and demand

Inbound tourism The level of spending by incoming visitors has grown rapidly, by more than 5 per cent per year in real terms since 1975. This is almost twice as fast as the Northern Ireland economy as a whole and comparable with the growth of the international tourism market. Much more may be possible. At the start of the Troubles Northern Ireland lost three quarters of its international market share of incoming visitors and slipped back to gaining barely a fifth of the out­of­state visitors to the island of Ireland, from a previous peak level of almost two fifths.

NI share of out­of­state visitors to the island of Ireland

40%

35%

30%

25%

20%

Source: NITB and Failte Ireland 15% Ref: P195/social trends/ch3

10%

5%

0% 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Comparisons with other places indicate that while Northern Ireland may be gaining close to its share of visitors to friends and relatives, it has a significantly smaller number of business visitors than the size of country and its business community might normally generate, and only a small fraction of the holiday trade.

15 Day visits Day visits within Northern Ireland are now considered statistically part of tourism because they fall within the international definition, and because day visitors are fundamental to the business viability of the tourism industry.

No of tourism day visits per resident

30 Countryside

25 Seaside/coast Town/city

20

15

Source: GB Leisure Day 10 Visit Survey 2002­3 and cogentsi estimates

Ref: Ref: Z/industries/TTT 5 /Tourism/ origins of LDV/novisits

0

t b s s d d d NI an an um an ndon tl H l land o Wales th East id ngl L r rth Wes M Sco o o f E N N ks/ South East or South West Y East Mid West East o

In fact the total value of leisure day visits is estimated at £1.7 bn or 10 per cent of all household consumption, but to enable comparison with English regions visits of less than three hours, totalling £1 bn, have been excluded. Even the £712 mn that remains is 56 per cent of tourism spending. In a year the average resident is estimated to take 16 of these longer day visits. Domestic day visits have not been a primary focus of activity or expenditure by the NITB up to now.

What tourists demand The pattern of spending supports traditional visitor stereotypes: visitors to friends and relatives stimulate their hosts into going out and about. They therefore account for the majority of spending on entertainment and at attractions, while holidaymakers spend diversely across Northern Ireland. Business visitors are least constrained in overall spending and typically spend far more on accommodation. This means that the bulk of £82.4 mn spent on accommodation by inbound visitors currently comes from business visitors:

16 Accommodation spend by visit category, £000 £82 400

£13 880, 17% Same­ day visitors

£5 200, 6%

VFR £5 260, 6%

Holiday

Business

Other

£58 060, 71%

Source: NITSA estimates Ref z:/P195/nitsa12003new/viscat ie2 The amount spent on entertainment and visitor attractions is less than at many tourist destinations. This is partly because of the low numbers of holidaymakers, and the fact that some of the most powerful attractions are available to all free of charge, but also because investment in tourism infrastructure has been low. Overall the mix of products supplied to tourists is extremely diverse, a little more than half being ‘characteristically tourist’ and the rest covering almost the whole range of personal purchased.

Products supplied directly to tourists in Northern Ireland

Knitted goods, 16 051 Recreational services, Clothing, 55 318 73 935 Car hire 17 319 Footwear, 11 874 Second homes, 19 716 Petrol & diesel, 30 998 Banking and finance, Telecommunications, 15 859 Motor trade , 21 549 17 413 Wholesale trade, 40 842 Travel agencies &c, 61 714 Other land transport, 19 971 Railway transport, 8 326

Slices broken out are 'tourism characteristic industries' in the Retail trade, 127 575 Tourism Satellite Accounts

Hotels etc, 108 476

Restaurants bars, 363 161 Figures show direct sales to tourists in £000 Hotels, catering, pubs etc, at basic prices (Gross Margins for the distributive trades) 471 638 Source NITSA Note that most food and drink purchases are not sold Ref P195 impact totspend ch2 directly but via the hospitality industries. Main chart total is £1108mn (£1278 mn total spending less £170mn in sales taxes).

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Business and economics

Tourism industries While other industries are defined in terms of what processes the supplier is engaged in, the tourism industry is defined in terms of the circumstances of the customers: are they inside or outside their normal environment? The tourism industry is therefore a collection of parts of other industries. It contributes, for example, about 39 per cent of the total sales income of the accommodation (hotels etc) industry and about 35 per cent of restaurants and bars. These numbers are obtained by carefully balancing supply and demand in the tourism satellite accounts. It also contributes in Northern Ireland about 23 per cent of sales of the passenger transport industry and 3 per cent of gross margins of the retail industry. Most goods purchased by tourists (as, indeed, most goods purchased by anybody in Northern Ireland) are imported, but most services are produced here. After deducting £170 mn for VAT and excise duty, and £253 mn for imports, total purchases of the products of NI industries are £855 mn. Using the fine industrial detail of the Northern Ireland Social Accounts and Input­ output Tables we can estimate the value added generated by these sales and the employment (and self employment) supported. Value added is £423 mn, about 1.9 per cent of the Northern Ireland total. This is the lowest percentage in the UK, and significantly below the 3.5 per cent estimated for the Republic of Ireland. The number of direct jobs is 24 200.

Tourism GVA as %ge of regional total

4.5%

4.0%

3.5% Source: estimates and updating based on First Steps 3.0% projects

2.5% Ref industry/TTT/UKGVA%

2.0%

1.5%

1.0%

0.5%

0.0%

st er s b d nd on est st) la d East est) e eland lan g n W r um d h s ( rth East Lo h o Mi N orth We t out N nd H s Sout S Wale reland ( thern I a r e Ea West Midlands Scotland (est) f I r East of En o No ed Kingdom (est) shi it blic u Un York p Re

But although small in terms of comparison with other places, Northern Ireland tourism is larger in economic terms than any single manufacturing sector, except tobacco, and of comparable size to several service sectors and to agriculture.

Growth And again, although still relatively smaller than other regions of the United Kingdom, the main tourist industries in Northern Ireland have been growing rapidly for 30 years

18 in both economic and physical terms. Since the mid 1970s tourism has driven about 8 per cent of the growth in the Northern Ireland economy. The number of beds, after being static below 10 000 through the 1970s and 1980s, has grown to 16 000 since the early 1990s. The number of people working in the hospitality industries has grown from less than 90 000 to more than 170 000 over thirty years, and hospitality gross value added in real terms has grown from £190 mn to more than £600 mn over the same period.

Hotels, catering, pubs etc GVA as % total GVA

4.0%

3.5% United Kingdom 3.0% Northern Ireland 2.5%

2.0% Source: DREAM®

Ref 1.5% z/industries/TTT/UKGVA%/H osp%3

1.0%

0.5%

0.0%

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Most global forecasters expect a slowing of tourism growth in Europe over the next 20 years, but the untapped potential means that Northern Ireland’s tourist industry need not slow down, and growth could even accelerate.

The supply chain After allowing for indirect jobs (the supply chain) and induced jobs (resulting when wages and salaries earned in the industry are spent) the total tourism GVA is 3.5 per cent of total Northern Ireland GVA.

19 The business­to­business supply chain behind tourism

900000

800000

700000

600000 other food 500000 drink transport

£000 400000 wholesaling retailing hospitality 300000

200000

100000

0 Direct Round2 Round3 Round4 Round5 Round6 remainder ref totspend/ch1 stages in the supply chain

The industries in the supply chain are quite different to those that tourists directly interact with, spreading the influence of the industry through the economy.

Methods & further details

Data sources Tourism information has been gathered from a wide number of sources, including the UN World Tourism Organisation, the Northern Ireland Passenger Survey, the International Passenger Survey and UK Travel Survey of the Office for National Statistics, the GB Leisure Day Visit Survey and sources at Failte Ireland and the Central Statistics Office. Wider economic information came mainly from DETI and other Northern Ireland Departments, ONS and CSO.

Tourism satellite accounts Measuring tourism is not an easy task because the industry is consumer­defined. Conventional industries are defined in terms of processes and activities or, for convenience, the products they produce. But there is no single tourist industry: many conventional industries serve the tourist, and tourism is defined as the activities of persons travelling to and staying in places outside their usual environment. Accordingly, international statistical agencies and the World Tourism Organisation have developed a new standard, ‘Tourism Satellite Accounts’ which describe how tourism fits into a national economy measured by the standard System of National Accounts. The TSA method has now been adopted by more than 70 countries. It consists of a set of ten tables (although in Northern Ireland as in most other countries, only eight have so far been prepared): TSA Table 1: Inbound tourism consumption, by products and categories of visitors TSA Table 2: Domestic tourism consumption, by products and categories of visitors TSA Table 3: Outbound tourism consumption, by products and categories of visitor

20 TSA Table 4: Internal tourism consumption, by products and type of tourism TSA Table 5: Production accounts of tourism industries and other industries TSA Table 6: Domestic supply and tourism consumption, by products TSA Table 7: Employment in tourism industries TSA Table 10: Physical indicators of tourism TSA Tables 1­4 draw mainly on visitor surveys to present the demand side of tourism in a rigorous way and indicate the goods and services tourists purchase: some of these are characteristic of tourism but many are the same as goods that people buy in the normal course of life. TSA Table 5 in fact summarises production and supply patterns across the whole of Northern Ireland, but focuses attention on the industries producing tourism products. TSA Table 6 draws supply and demand together, showing how much of the activity of each industry is oriented to tourists, and TSA Table 7 applies this to the employment in each industry. As well as this main report, Volume 2 is to be published setting out in detail the sources and methods used.

Social accounts and input-output tables for Northern Ireland To prepare TSA Table 5 and to provide a basis for comparison with other industries it was necessary to prepare a complete set of social accounts and input­output tables for Northern Ireland. This is the first time such a set of ‘national accounts’ has been prepared in detail for Northern Ireland, and information from many of the business and household surveys conducted by the Executive was incorporated. The final tables make as much use as possible of these surveys, and are drawn up to be consistent with the UK’s national and regional accounts and use the baseline work undertaken by the Office for National Statistics. As well as developing the accounts so that they are ‘fit for purpose’ when it comes to measuring tourism, it has been decided to make them available as an ‘exposure draft’ so that they can be used as the basis for other applications in other industries and in relation to other policy issues right across the economy.

Find out more Volume 2 setting out technical details of data and calculations will be finalised in March 2007 and will be available from Northern Ireland Tourist Board St Anne's Court 59 North Street BELFAST BT1 1NB Tel +44 (0)28 9023 1221 or from the Department for Enterprise, Trade and Investment Netherleigh Massey Avenue BELFAST BT4 2JP Tel +44 (0)28 905 29475 Email:[email protected] The Social Accounts and Input­output Tables are being issued by DETI and the Northern Ireland Statistics and Research Agency and are available from the same address. Two articles will appear in the Northern Ireland Economic Bulletin in June 2007

21 The reports were prepared by Cogent Strategies International Ltd, www.cogentsi.com, in response to the terms of reference reproduced in Section 14. The Steering Group consisted of representatives from DETI and NITB and the authors and the steering group would like to acknowledge assistance and helpful inputs from across business, government and academia in Northern Ireland, and from Great Britain and the Republic of Ireland. The calculations make use of cogentsi’s DREAM® Detailed Regional Economic Accounting Models of the United Kingdom and Republic of Ireland.

22 The tourism economy in a nutshell DEMAND

Incoming day visitors to Northern Ireland spend £23 mn

and incoming overnight visitors £284 mn

Leisure day visitors within Northern Ireland on long trips £712 mn spent an estimated

and NI people staying away from home overnight within £133 mn Northern Ireland spent

NI residents' second homes have an annual value of £20 mn

and outward­bound NI tourists' spending in NI is £105 mn

Thus identifiable ‘tourism’ expenditure in Northern Ireland £1278 mn totals SUPPLY

Vat and duty of £170 mn is collected on this leaving a net £1108 mn figure for purchases within NI of

Many goods and some services are imported £253 mn

Leaving demand on NI producers of goods and services as £855 mn

VALUE CHAIN

The direct value added (GVA) in supplying these sales was £423 mn

The direct number of jobs (employee­jobs and self 24200 employed) was

of which the full­time equivalent is: 18000

The indirect sales, value added and jobs arising in Northern Ireland in the supply chain are £283 mn, £123mn and 4300(3800FTE) 17.40 When people working directly and in the supply chain spend their incomes they induce sales, value added and

employment of £470 mn, £236 mn and 8200(6700FTE) 20070316

GRAND TOTAL

The grand total of economic activity supported by tourism is therefore

£1608 mn sales by NI producers

£783 mn gross value added, or 3.5 per cent of Northern Ireland's total GVA (GDP) 36700 jobs, or 5 per cent of the posts in Northern Ireland Figures may not add precisely due to rounding

23 Measuring tourism: a new approach

Tourism Satellite Accounts How is tourism’s economic contribution to be managed? The dictum of the management thinker Peter Drucker applies: ‘You can’t manage what you can’t measure’. When it comes to measuring tourism the steering group for a National Review of UK Tourism Statistics arrived at the following summary in 2004: Due to the sheer diversity of tourism services, and the unique challenge of measuring a consumer­ defined industry, we have

come to believe that there Tourism Satellite Accounts Table 4 Northern Ireland 2003

Internal tourism consumption, by is no other sector in the UK products and types of tourism

Ot h er Internal tourism economy as significant as com p onents of consump tion (in Visitors final consumption expen d iture in cas h visitors cash an d in consump tion kind ) Domestic Internal tourism Inbound tourism tourism consump tion in tourism in which the key consumption consumption cash Products

A. Specific products A.1 Characteristic products (a) 1 – Accommodation services strategic and management 1.1 – Hotels and other lodging services (3) £82 406 £33 258 £115 663 £115 663 1.2 – Second homes services on own account of for free £19 170 £19 170 2 – Food and beverage serving services (3) £98 168 £314 837 £413 005 £413 005 3 – Passenger transport services (3) £14 228 £42 567 £56 795 £56 795 3.1 Interurban railway (3) £152 £10 308 decisions are so hampered 3.2 Road (3) £3 012 £22 568 3.3 Water (3) £40 3.4 Air (3) £40 3.5 Supporting services 3.6 Transport equipment rental £10 984 £9 690 £20 674 £20 674 3.7 Maintenance and repair services by a lack of adequate data. 4 – Travel agency, tour operator and tourist guide services £4 042 £57 826 £61 867 £61 867 4.1 Travel agency (1) 4.2 Tour operator (2) 4.3 Tourist information and tourist guide 5 & 6 – Recreational, cultural and sporting services (3) £14 607 £65 154 £79 761 £79 761 Existing sources are no 5.1 Performing arts 5.2 Museum and other cultural services 6.1 Sports and recreational sport services 6.2 Other amusement and recreational services 7 – Miscellaneous tourism services £10 928 £47 328 £58 256 £58 256 7.1 Financial and insurance services £5 081 £19 610 £24 691 £24 691 longer fit for purpose and 7.2 Other good rental services 7.3 Other tourism services £5 847 £15 538 £21 386 £21 386

A.2 Connected products distribution margins goods (4) the potential economic, services

B. Non specific products-Retail Tourism Satellite Accounts T£83 201 £422 705 £505 906 £505 906able 1 Northern Ireland 2003 distribution margins £24 608 £149 993 £174 601 £174 601 goods and services(4) Inbound tourism consumption, by pro£35 259 £194 881 £230 141 £230 141ducts and categories of visitors social and environmental VAT and other product taxes visitor final consumption expenditure£23 334 £77 830 £101 164 £101 164 TOTAL net of distribution margins and agency/ tour operator margins£307 580 £983 675 £1 291 254 £19 170 £1 310 424 Value of domestically produced goods net of distribution margins and tax £4 702 £9 800 £14 502 Value of imported goods net of distribution margins and tax £24 460 £133 796 £158 257 Same­day Total Value of domestically produced services net of tax £225 064 £641 787Produc £866ts 851 £19 170 VFR Holiday Business Other visitors contributions of the Value of imported services net of UK tax £9 021 £39 096 £48 118

A. T ourism-s p ecific p ro d ucts ( a) (a) See note under Table 1 A. 1 Ch aracteristic p ro d ucts 1 – A ccommo d ation services (*) Corresponds to 1.3 in table 1 tourism sector will only be 11. – H otels an d ot h er lo dgg in services ( 3 ) £5 204 £13 881 £58 060 £5 260 £82 406 (**) Corresponds to 2.9 in table 2 (***) These components (referred to as visitor final consumption expenditure in kind, 12tourism. – S econsocial d transferh omes inservices kind and on tourism own accountbusiness or expenses) free of c hg ar e X are recorded separately as these components are not easily attributable by types of2 –tourism Fd oo and b evera g e servin g services ( 3 ) £10 277 £45 462 £12 847 £24 097 £5 485 £98 168 3 – P assen g er trans p ort services Internal to N ort h ern Irelan d (exc own ve h icle) £1 505 £4 133 £2 119 £5 659 £811 £14 228 (1) Corresponds to the margins of the travel agencies 3. 1 Interur b an railwa y ( 3 ) £16 £44 £23 £60 £9 £152 realised if priority is (2) Corresponds to the margins of the tour operators 3. 2 R oa d ( 3 ) £319 £875 £449 £1 198 £172 £3 012 (3) The value is net of the amounts paid to travel agencies and tour operators 3. 3 W ater ( 3 ) £4 £12 £6 £16 £2 £40 (4) The value is net of distribution margins 3. 4 A ir ( 3 ) £4 £12 £6 £16 £2 £40 3.5 Supporting services 3.6 Car hire etc £1 162 £3 191 £1 636 £4 369 £626 £10 984 allocated to better 3.7 Maintenance and repair services 4 – Travel agency, tour operator and tourist guide services £64 £393 £669 £2 661 £254 £4 042 4.1 Travel agency (1) 4.2 Tour operator (2) 4.3 Tourist information and tourist guide measurement. 5 & 6 – Recreational, cultural and sporting services (3) £1 499 £7 159 £2 516 £2 775 £658 £14 607 5.1 Performing arts 5.2 Museum and other cultural services 6.1 Sports and recreational sport services 6.2 Other amusement and recreational services 7 – Miscellaneous tourism services £1 136 £4 656 £1 774 £2 561 £801 £10 928 7.1 Financial and insurance services £528 £2 165 £825 £1 190 £372 £5 081 7.2 Other good rental services Two years later some aspects of 7.3 Other tourism services £608 £2 491 £949 £1 370 £429 £5 847 A.2 Connected products distribution margins goods and services(4) the UK data have grown more memo: taxes on products included above £1 262 £6 180 £3 142 £9 173 £1 241 £20 997

B. Non specific products-Retail £8 697 £45 330 £9 138 £16 525 £3 511 £83 201 distribution margins £2 561 £15 688 £2 359 £3 093 £907 £24 608 goods and services(4) £3 688 £18 702 £3 958 £7 392 £1 519 £35 259 problematic because of social and VAT and other product taxes £2 449 £10 940 £2 820 £6 040 £1 085 £23 334

TOTAL £23 179 £112 338 £42 944 £112 338 £16 780 £307 580

number of trips (000s) 620 896 340 603 111 2 570 economic changes. In particular, number of overnights (000s) 4612 1153 2217 887 8 869 (a) Although called 'products', the international TSA manual includes no goods as 'characteristic' for the time being. X does not apply

(1) Corresponds to the margins of the travel agencies telephone surveys meet (2) Corresponds to the margins of the tour operators (3) The value is net of the amounts paid to travel agencies and tour operators which are shown separately in category 4 increasing consumer resistance, (4) The value is net of distribution margins which are itemised in the line above and includes purchases for motoring especially amongst the more affluent social and economic groups that tend to spend more on tourism. As much of the data is survey­based and the law of large numbers means we can be less confident of data when fewer people are sampled, the reliability of the results for individual regions of the UK is much less than for the UK as a whole. This problem is greatest in Northern Ireland, the smallest region, and in addition two of the four key UK surveys1 do not collect data in Northern Ireland at all.

1 The four key UK surveys are the UK Occupancy Survey, the UK Travel Survey, the International Passenger Survey, and the Great Britain Leisure Day Visits Survey. The latter two do not operate in Northern Ireland.

24 However, there are some aspects of tourism data where Northern Ireland is better­ measured than other UK countries and regions since in UK national surveys the sample size for areas such as Northern Ireland is likely to be small. Measuring tourism is not an easy task because, as the steering group said, the industry is consumer­defined. Conventional industries are defined in terms of processes and activities or, for convenience, the products they produce. But there is no single tourist industry: many conventional industries serve the tourist, and tourism is defined as the activities of persons travelling to and staying in places outside their usual environment. Accordingly, international statistical agencies and the World Tourism Organisation have developed a new standard, ‘Tourism Satellite Accounts’ which describe how tourism fits into a national economy measured by the standard System of National Accounts2. The TSA method has now been adopted by more than 70 countries. Two years ago a project known as ‘First Steps’ set out to apply the TSA method to Northern Ireland That project made significant progress, but was limited by the availability of information both on tourism and on the wider structure of the Northern Ireland economy. For the present report many of these limitations have been addressed, notably as regards the wider structure and context. Part of this report presents provisional tables of a new Tourism Satellite Account for Northern Ireland, updated by three years. Volume Two of this report series presents the methodology behind these accounts. A separate report, Social Accounts and Input­output Tables for Northern Ireland, presents the framework for the wider structural measurement of the Northern Ireland economy. Although these estimates are as firmly based as possible, drawing on many of the statistical sources for Northern Ireland, the United Kingdom and the Republic of Ireland as was appropriate and feasible, the data and estimates must still be considered provisional. This report thus represents a ‘Second Step’ from which increasingly confident strides can be made. It combines aspects of both a ‘top down’ and a ‘bottom up’ approach to economic measurement of tourism, and thus places Northern Ireland in the vanguard of measuring tourism below the level of the sovereign state.

2 Following the collapse of communism in the early 1990s, the UN System of National Accounts has been adopted universally. EU directives implement it via the compulsory Eurostat standard ESA95 with which national statistical agencies like ONS must comply.

25 Part One The tourism market in Northern Ireland, tourism spending and market shares

26 1. The market overall A tourist is officially someone ‘outside her or his normal environment’ and a key aim of this report was to come up with a reliable estimate of the economic value of tourism to Northern Ireland. The new statistical methods set out below lead to a figure for tourism spending in 2003 of £1278 mn. This is almost comprehensive, although there are some categories of visit which have defied measurement3, so the total must be considered a slight underestimate. It is analysed in Figure 1, which shows out­of state visitors making up just less than a quarter of the market (£308 mn), in five categories of visit determined by purpose, and four categories of tourism spending by Northern Ireland residents. Figure 1 Market overview

Tourism spending of £1278 mn ­ the overall picture Domestic spending of outbound tourist 8% Domestic overnight tourists Second homes in NI 10% 2% Out of state same­day visitors 2% Out of state visitors to friends and relations 9%

Out of state holiday visitors 3%

Out of state business Domestic same­day leisure visitors visitors 9% 56% Other out of state visitors 1%

Source: NITSA Ref P195 /2003/nitsa42003/ch1

3 examples are day business visits within Northern Ireland, and some cross border motorists

27 2. Inbound visitor spending The visitor from out­of­state, and indeed primarily the one who stays overnight, is the she or he who makes the most obvious direct injection to the Northern Ireland economy. Encouraging such visitors is the traditional reason for the founding of tourism promotional bodies such as the NITB and Tourism Ireland, and remains a major thrust of most tourism strategies, including Northern Ireland’s. On the face of it Northern Ireland’s performance looks impressive. Out­of­state overnight revenue reached £357 million in 2005, up from £7 million in 1959. In our base year of 2003 Northern Ireland receipts from 2.57 million inbound visitors totalled almost £310 mn. Business and family visitors accounted for almost a third each of the spending, the remaining third being split between same­day visitors and holiday/miscellaneous categories. Figure 2 Composition of inbound tourism spend

Inbound tourism spend by visit category £308 mn

Same­day visitors

£23 200, 8% £112 300, 36%

VFR £16 800, 5%

Holiday

Business

Other £112 300, 37% £42 900, 14%

NB Data labels show amounts in £000 Source: NITSA estimates Ref z:/P195/nitsa12003new/viscat ie2 This figure is part of a process of real growth in tourism income from outside which has averaged 5.0 per cent per year since 1975, as shown in Figure 3. This is almost twice as fast as the 2.7 per cent growth rate of the Northern Ireland economy as a whole, but over the first twenty years it was only just sufficient to recover the severe loss in the early 1970s.

28 Figure 3 Real inbound tourism spending in NI 1959­2005

Real growth in inbound overnight tourism spending in NI

18000

16000

14000

12000

out of state spending deflated by 10000 RPI

8000

6000 Source: NITB, UN World Tourism Organisation, ONS, 4000 cogentsi calculations

REF z/P195 Social 2000 Trends/realgrowth

0 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 I

Global market perspective The incoming visitor figure represents a small share of a very large and rapidly growing global market, 0.3 per cent in terms of numbers and 0.1 per cent in terms of money. Figure 4 Global international tourist arrivals, visitors by continent

International Tourist Arrivals, 1950­2004

800

700

Middle East 600 Europe

Asia and the Pacific 500 Americas

Africa 400 millions

300

200

100

0

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 The number of tourists travelling the world has grown 30­fold since 1950, and most of the growth has been in Europe, in terms of holiday tourism to Mediterranean countries and business visits to commercial capitals.

29 Figure 5 Index of international tourism spending 1950­2005

World international tourism growth 1950­2005

50.00 International tourism expenditure in real terms terms

40.00 real

in 7.3 per cent annual growth

30.00 spending 1950=1.00

tourism Index, 20.00 Source: UN World Tourism Organisation, Budget of the USA, cogentsi calculations 10.00

International REF z/industries/TTT/Tourism/w orld tsm gth ­ r & a/ real growth 0.00 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

If we move from a simple count of people to measuring the economic significance in terms of real spending, the growth overall has been half as fast again, even though the setbacks in the 1980s and the 1990s were more severe. Globally, spending by tourists, and therefore the income of the industries and people serving them, has grown by a factor of 50, an average annual rate of 7.3 per cent over nearly 60 years. Recession and stagnation after 1980 and 1995 lasted for about five years, and are usually ascribed to the direct and indirect effects of Middle Eastern conflicts, extended in the latter case by 9/11. In each case it amounted to a downward stagger in the growth curve of around 20 per cent in real values. Not only has the amount of tourism changed, but so has the pattern of tourism. Even as incomes and leisure time increased, the availability of cheap jet flights was instrumental in switching demand from the domestic tourist towards sunnier (or snowier) destinations, and more recently to exotic resorts and cities. In the new destinations there has been a process of social and physical adaptation and learning, including the advent and assimilation of new migrants (national and international) to work in service industries. Meanwhile traditional destinations which lost market share, such as coastal resorts in moderate climes, have had to confront economic development issues and think about regeneration. Leisure tourism, as a global phenomenon, increasingly includes many more short breaks and sporting and activity holidays. The UN World Tourism Organisation estimated that these now make up the majority of global tourism growth, and they are market segments in which Northern Ireland is better equipped to compete than with the longer­break sun and winter sports destinations. Business tourism, both discretionary (e.g. conferences) and ‘in service’ have both increased as the time and cost of travel has fallen in real terms, and as business itself has become more international. The opening up of some international labour markets has also had an effect, both on business trips and on tourism for study purposes. Another effect of the free movement of labour is that, increasingly, places that attract tourists find that they also have growing populations. In part this is because people

30 make choices of where to live and work (or retire) based on their travel experience, in part because the features of a region that make it good to visit also make it an attractive place for nationally and internationally mobile people to live.

4

4 Belfast City Airport has now been renamed as George Best Belfast City Airport

31 Northern Ireland tourism in a time perspective In Northern Ireland the loss of inbound market share was not a question of a steady process, but a sudden shock, as shown in Figure 65. Figure 6 NI share of global international tourism 1959­2005

NI arrivals and receipts from out of state visitors in ratio to world international totals

1.2%

Out of state visitor arrivals 1.0% in ratio to global international tourism arrivals

0.8% Out of state tourism expenditure in ratio to global international tourism 0.6% receipts

Source: NITB, UN World 0.4% Tourism Organisation, ONS, cogentsi calculations 0.2% REF z/P195 Social Trends/share

0.0% 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004

Three quarters of Northern Ireland’s global market share disappeared in the years 1969 to 1972. Since then the remaining core market share seems to have been well­ defended, but consists significantly of ‘less discretionary’ tourism, such as business trips and visits to relatives. However the innate attractiveness of Northern Ireland as a destination is evidenced by the level of penetration before the Troubles, and this provides hope for a developing economic contribution from tourism.

5 Strictly speaking, out of state arrivals are not ‘international market share’ because many of them are not international, coming from Great Britain.

32 Comparisons with elsewhere This is perhaps seen most acutely in a market share comparison close to home, by comparing out­of­state visitors to Northern Ireland with those to the island of Ireland as a whole. Figure 7 Share of overseas visitors to Ireland 1960­2004

NI share of out­of­state visitors to the island of Ireland

40%

35%

30%

25%

20%

Source: NITB and Failte Ireland 15% Ref: P195/social trends/ch3

10%

5%

0%

1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 In 1969/70 the number of visitors to Northern Ireland was more than 60 per cent of the number to the Republic of Ireland – or to put it another way, Northern Ireland garnered 36 per cent of all visitors to the island of Ireland. In the early 1970s the Republic and Northern Ireland both suffered a fall in tourism numbers, but the Republic recovered relatively quickly. Seven years later the share of Northern Ireland in overseas visitors dipped below 20 per cent, as shown in Figure 7. Since then the highest point, when currency exchange rates and relative prices were particularly favourable, has been 28 per cent and the level is now 21 per cent. It must, of course, be emphasised that the Republic’s tourism product, and the promotion of it, have been considerably developed over the period. Nevertheless the comparison is striking. If Northern Ireland had matched external visitor trends in the Republic of Ireland since 1969, tourism income from this source would be expected to be worth some £270 million in 2006, or more than 11 000 jobs. In order to regain this share it would need to grow in real terms at 14 per cent per year over the next 10 years or 9 per cent over the next 20 years. In contrast, average growth in external tourism spending has been 3.6 per cent in real terms over the last 5 years. Thus the crude arithmetic of both the global and the Irish market share calculations would suggest that there is room for at least a doubling of inbound tourism activity. This could happen gradually, as the international community regains its confidence in Northern Ireland, begins to learn new habits and, hopefully, builds on positive, exciting and pleasurable experiences.

33 Figure 8 Comparison of NI and ROI out of state visitor nos 1960­2005

Out­of­state overnight visitors

8 000 000

7 000 000

6 000 000 Irish Republic out of state visits

5 000 000

4 000 000

3 000 000

2 000 000 Northern Ireland out of state visits

1 000 000

Source NITB and Failte 0 Ireland 6 Ref : P193/ nitsa/ social 62 64 68 70 72 76 82 86 88 92 94 00 02 9 9 9 9 9 9 9 9 9 9 9 0 0 19601 1 19661 1 1 19741 197819801 19841 1 19901 1 199 19982 2 2004 trends/NIROI

Comparison of trends is not the only indication that Northern Ireland’s share of the international market is especially depressed. Similar indications that it could be much higher are evident if we look at the pattern of visits. The proportion of visits to NI that are holiday is very low in comparison to UK levels. It can, for example, be compared with either UK or Scotland: Table 1 Split by purpose: UK, Scotland and NI visits VFR and Spending by: Holiday Business other International visitors to UK 34% 31% 35% Domestic visitors within UK 65% 22% 13% UK visitors in Scotland from rest of UK 70% 21% 9% International visitors to Scotland 45% 17% 38% Out of state visitors to NI 15% 40% 45% Sources: UK and Sco ttish TSA s RRef P195/vismix A conservative assumption is that spending on visiting friends and relations is as close to potential in Northern Ireland as elsewhere, and we can ‘standardise’ on that. For example, Scotland has more than seven times as much spent by UK holiday visitors as visitors to friends and relations, while Northern Ireland has only a third as much On this assumption the ratios suggest that international visits to Northern Ireland would increase, primarily through more than a doubling of holiday visits. Business visits from Great Britain would also double and holiday visits would increase many­ fold – 15 or 20 times, depending on whether the ‘average GB’ or ‘Scottish’ model was most appropriate. These calculations are plainly only illustrative, but suggest that the greatest potential for increasing visits lies in GB, and especially in holidays.

34 We will need to take giant steps to regain historic market share

Spending by type of purchase Visitors spend money mainly on accommodation, eating and drinking, purchases in shops, entertainment, and travel, and the proportions are captured in the various surveys. Figure 9 Purchases of inbound tourists

Inbound tourism spend by purchase category £308 mn

Accommodation £23 300, 8%

£82 400, 27% Food & drink

Transport services (in NI) £35 300, 11%

Agency/operator margins

Entertainment &c

£24 600, 8% Misc tourism services

Distn mrgns, non­spec products

£10 900, 4% Non­specific products

£14 600, 5% £4 000, 1% Taxes on non­specific goods £98 200, 31%

£14 200, 5% Source: NITSA estimates Ref z:/P195/nitsa12003new/purccat ie In the Tourism Satellite Accounts visitor spending is divided into products and services characteristic of tourism, primarily hospitality services and transport, some

35 that are specific but non­characteristic such as insurance, and those that are non­ specific to tourism. About three quarters of spending is on tourism­specific goods and services, and the value of drawing the distinction becomes clearer in Part Two. Figure 10 Daily purchases of inbound visitors by purpose of trip

Spending per day, by visit category day/night difference £60.00 Taxes on non­specific goods

Non­specific products £50.00 Distn mrgns, non­spec products

Misc tourism services £40.00 Entertainment &c

Agency/operator margins £30.00 Transport services (in NI)

Food & drink £20.00

Accommodation

£10.00

Source: NITSA estimates

£­ Ref z:/P195/nitsa12003new Same­day VFR Holiday Business Other Total /dayspendcht visitors

Patterns of spending show interesting variations and regularities across the different types of trips. Figure 10 shows spending on a ‘per day’ basis, where a trip length in days is one more than the number of nights. The light shadow bar at the top of the towers shows the difference between this ‘per day’ estimate and a ‘per night’ estimate. Amongst the overnight visitors the greatest differences are in accommodation spend, with business travellers spending more than twice as much as holidaymakers and others, and with people whose trip purpose was to visit friends and relations spending very little. Overnight visitor spend for travellers from outside Ireland travelling direct to Northern Ireland is directly measured by an NITB survey, but there are two important supplements. To assess visits from residents of the Republic and those coming from other places via the Republic data from the Central Statistics Office is used, and the NI day visitor figure is partly based on Republic data and on multiplying the number of visitors (collected by NITB) by expenditure figures from elsewhere.

36 Transport Figure 11 Transport modes reported by visitors and estimated spending

Transport use by visitors to Northern Ireland

100%

90%

80% Other, mainly walk

70% Boat Own motor vehicle 60% Taxi

50% Hired car

Bus & coach 40% Train 30% Source: Northern Ireland Passenger Survey, NITB 20% Ref P195/2003/NITSA12003new 10%

0% Reported 'main means of transport' Estimated expenditure shares

The most common means of travel within Northern Ireland by far is the private car, with car hire coming second in economic terms followed by taxis and buses. It is important to note that according to the international convention, use of the visitor’s own vehicle is NOT counted as transport services, but rather as purchase of petrol and other motoring consumables. Train is used little, except by visitors originating in or arriving through the Republic of Ireland. The low level of spending on railway transport is an important difference from the pattern of tourism spending in other UK regions. In Belfast, of course, the role played in London and other UK cities by underground railways is mainly taken by taxis and buses. Rail is used to travel to and from the Republic but visitors, like Northern Ireland residents, make comparatively little use of the network within Northern Ireland vis­à­vis their counterparts in GB. A general caveat with the travel data is that it is collected through the Northern Ireland Passenger Survey, and so may not be fully representative of categories of visitors not covered, notably those arriving from or via the Republic.

Three main inputs from outside The skyscraper diagram, Figure 12, highlights the tourism account’s four main injections from outside to the Northern Ireland economy. The most salient is business visitors’ purchases of accommodation, amounting to £58 mn, followed by£45 mn worth of VFR purchases of meals and drinks out.

37 Figure 12 Skyscraper diagram of inbound spending by purpose & purchase

Inbound visitor spending (£000)

£60 000

£50 000

£40 000

£30 000

£20 000 £10 000 £0 Other

Business

drink Holiday NI) &

(in VFR

&c

Food margins

Accommodation Same­day visitors services services

non­spec goods products

Entertainment tourism

Source: NITSA estimates products Transport mrgns,

Agency/operator Ref z:/P195/nitsa12003new Misc

/tsaT1skyscraper Distn non­specific Non­specific on

Taxes General shopping by vfr visitors also accounts for £45 mn, spread across the three smaller blue towers under the heading ‘non specific spending’. Food and drink purchases by business visitors are fourth, at £24 mn. The consequence is that the economic orientation of the accommodation sector is very much to business visitors: Figure 13 Inbound visitors’ accommodation spending by visit purpose

Accommodation spend by visit category, £000 £82 400

£13 880, 17% Same­ day visitors

£5 200, 6%

VFR £5 260, 6%

Holiday

Business

Other

£58 060, 71%

Source: NITSA estimates Ref z:/P195/nitsa12003new/viscat ie2 Incoming visitors devote 27 per cent of their total spending to shopping, and NITB surveys identify gifts and souvenirs. More detailed evidence from elsewhere has been used to further break down the pattern of ‘shopping’ ascribed to tourism. For

38 accounting reasons petrol purchases count as ‘goods’ in the Tourism Satellite Accounts, and after this clothes, souvenirs and gifts, alcohol and tobacco are important. This mix of products is such that the tax take is high, with the great majority of purchases subject to VAT and with alcohol, tobacco and petrol attracting duty. (VAT refunds can be paid to non­EU visitors on goods taken home, but these are negligible in a NI context). Although the great majority (more than 90 per cent) of the goods visitors buy are imported, these purchases still make a contribution to the Northern Ireland economy. The retail and wholesale margins are high in the products that tourists purchase. Therefore a significant part of the benefit of these purchases flows to the retailers of clothes and fancy goods, alcohol and tobacco, rather than the manufacturers. The role of entertainments and attractions with inbound visitors is relatively small, but it is noteworthy that half of the ‘inbound’ market for entertainment is people visiting friends and relations: Figure 14 Inbound visitors’ entertainment spending by visit purpose

'Entertainment' spend by visit category, £000 £14 600

Same­day visitors £1 500, 10%

£660, 5% VFR

£7 160, 49% Holiday

£2 780, 19% Business

Other

£2 520, 17% Source: NITSA estimates Ref z:/P195/nitsa12003new/viscat ie2 Overall the pattern of spending supports, and is supported by, visitor archetypes such as the business visitor spending on necessary services and support without excessive constraint, the family member making a contribution to the host household and encouraging it into travel and experiences it might not have pursued without the visitor, and the holidaying family exploring Northern Ireland in hotels and guest houses and self­catering accommodation. Inbound visitor data are summarised in Table 1 from the Tourism Satellite Accounts.

39 Figure 15 International connections from Belfast airports

6

6 As at year-end 2006

40 3. Spending on tourism in Northern Ireland by Northern Ireland residents Spending by domestic tourists is approaching £1bn, and within this the largest single tourism activity in Northern Ireland, by far, is the leisure day visit. According to the best estimates we can make, and on a restricted definition cutting out shorter trips, leisure day visits alone account for more than five times as much as the expenditure of overnight domestic tourists. Figure 16 NI residents’ spending in NI by visit type

NI residents' spending on tourism in NI £970 mn

Second homes, £19 661, 2% In connection with overseas travel, £105 400, 11%

Overnight visits, £132 800, 14%

Units on datalabels are £000

Same­day visits, Source: NITSA estimates £712 200, 73%

Ref z:/P195/nitsa22003 /Chart2

The measurement and importance of tourism day visits Unfortunately the best estimates of spending on day visits are nevertheless rather limited, because there is no collection of original monetary data in Northern Ireland. The estimate we have made, included in the table above, is based on the Leisure Day Visit survey conducted in Great Britain, and that survey itself is limited in its scope, coverage and accuracy. Why has this important aspect of tourism not hitherto been examined in greater detail, and why is there a dearth of original information? The First Steps research project put it well: In general terms the general neglect to date in measuring same-day visits has arisen for two reasons. Firstly, economic circumstances and poor transportation networks meant that day visits were not a major phenomenon when the definitions of tourism were first established. Secondly, when statistical offices first began to seriously measure tourism the major focus was on the balance of payments and ‘export tourism’. With the change to a ‘services economy’ and the generalised improvements in real incomes and lifestyle patterns, such an absence of a focus on day visits seems misplaced. In addition, it must also be stressed that domestic tourism and same- day visits are increasingly recognised for most tourism destinations as being the ‘mainstay of the tourism industry’ (particularly but not solely in rural areas) and so it seems logical that tourism policy be informed by such developments. Essentially, what the TSA has done is estimate what we more or less knew implicitly, but had never estimated before.

41 We would add to the University of Limerick’s observations two further reasons. Firstly the businesses that benefit from same day visit expenditure are much more diffuse, specifically because the spending does not include accommodation services, although of course other services may be bought from hotels or other businesses that are primarily accommodation providers. Secondly, location marketing is a very different proposition when directed at indigenous or relatively nearby residents. The first may mean there is less of a lobby for measurement, and measurement is itself more difficult, and the second can affect the pressure for policy and coordination that exists. We would also emphasise their point about lifestyles very strongly. In what is known as the ‘creative’ or the ‘talent economy’ then it is recognised that a major contributor to economic success is the ability to attract and retain people of high prestation and ability. For example the influential work of Richard Florida argues that a lively and tolerant culture is a major component, alongside technology, in attracting and getting the best out of talented people. On such people not just the tourist industries but the other 95 per cent of the economy depend for competitiveness, innovation and prosperity. In such an environment the businesses that support tourism day visits will thrive, and to it they will make a major contribution. Some of the best experience of living in Northern Ireland will be related to some of the best experiences that visitors to Northern Ireland enjoy, and measuring them together is natural. Our main source in estimating day visits through a modelling approach is a survey carried out in Great Britain, and we have followed the GB practice of distinguishing only the longer visits (over 3 hours) as ‘tourism’. However this distinction is old­ fashioned. It is not strictly in concordance with the TSA manual, as it is perfectly possible for a Northern Ireland resident to leave her or his ‘normal environment’ in the span of three hours. If all leisure day visits were taken into account, not just the shorter ones, there would be an additional £400mn counted in eating and drinking out, £120 mn on entertainment and attractions, and £500 mn in shopping. The overall total of within­Province tourism would more than double. It seems likely that at least part of eating and drinking out and of entertainment should truly be considered ‘tourism’. It certainly contributes to the viability of tourism businesses and could legitimately benefit from tourism promotion. Another important omission, which we have not addressed because of an almost complete lack of data, is day visits for non­leisure purposes, such as on business, visiting friends and relatives, education, and personal business. These have not been included in the UK or English TSAs.

42 Patterns of spending Figure 17 NI residents’ tourism spending in NI by purchase

Northern Ireland residents' spending in NI £970 mn

£350 000

£300 000 Outward bound

£250 000 Staying in NI, away from home

£200 000 Day visits

£150 000 Second homes

£100 000 Source: NITSA estimates

£50 000 Ref z:/P195/nitsa22003 /Chart1

£­ oher on not taxes

and and Ireland

agency, services guide (served) sport, internal services and

Recreation, Food and Passenger –

margins VAT product Miscellaneous Distribution services products – Travel –

6

tourist – operator tourism­specific tourism­specific Accommodation 2

– Northern 3 culture, entertainment tourism

&

7 margins/charges –

transport 4

5 to beverages Goods not 1 Purchases of goods (including petrol) dominate spending, although dividing these between the cost of the goods themselves, taxes and distributors’ margins hides the fact they make up 47 per cent of the total. Food and drink is the next category, with entertainment and attractions a distant third at 7 per cent. Accommodation costs are low for the overnight tourists. This may be partly due to limited budgets which would limit effective demand, and partly because many tourists are visiting friends and relatives, which would tend to reduce or eliminate costs, and also partly because of the role of second homes which is considered in Section 4. Similar in size to overnight visits by Northern Ireland residents is spending in Northern Ireland by residents in conjunction with making trips whose actual destination is outside. Some of this is transport, goods and other services in connection with the journey, but most is commissions earned by NI travel agencies on outward travel. These are estimated, but the estimate is based on historic UK data and the value is likely to be falling as increasing use is made of the internet. Domestic data is summarised in Table 2 from the Tourism Satellite Accounts and in this discussion the imputed value of second homes is included, from TSA Table 4.

Second homes Information on holiday homes is limited but there are some indications available from two sources. There were 3100 second houses enumerated in the 2001 Census. Most second homes are in coastal regions and almost a third of them in the Coleraine area, where property prices are relatively high. Trading Standards authorities estimate there are some 11700 stationary caravans. The rent imputed to these houses and caravans is estimated at £20 mn, and so the not­for­cash sector adds a significant element to the accommodation identified in Section 2 where cash changes hands.

43 4. Outbound tourists Although it is of less direct relevance to tourism promotion activity within Northern Ireland, outgoing visitor spending is important in three respects: • for the ‘within NI’ component as we have seen in the previous section, notably the margins earned by the tourist trade on outward bookings • to consider the competitive elements of the domestic tourism offering • to assess the ‘balance of payments’ implications of tourism

NI outbound tourist consumption 2003 £mn Same­day Total Tourists visitors visitors Accommodation 0 344 344 Food and drink 16 295 310 Passenger transport 9 423 431 Travel agencies 0 11 11 Recreation, culture, sport, entertainment 5 177 182 Miscellaneous tourism services 4 19 23 Other purchases 12 245 257

Total 45 1514 1559

No of visitors (000) 643 3400 4043 No of nights (000) 0 19300 19300 Ref P195/2003/NITSA32003new Although consistent with figures quoted previously and elsewhere, the same­day visitors figure is not considered especially reliable, because of the difficulties of measuring cross­border traffic with the Republic of Ireland. The outgoing spending leads to two comparisons of interest: Θ the overnight cash spending of NI people out­of­state, £1.51 bn, is more than ten times the overnight spending of NI people within NI, which is £0.13 bn. Θ the total outgoing spending of £1.56 bn is more than five times the inbound spending of £0.31 bn. This ‘tourism deficit’ of £1.25 bn is significant in the context of NI’s total GVA of £22.2 bn and an overall estimated trade deficit of some £13 bn. These comparisons are made notwithstanding that the same­day figure is probably an underestimate.

44

Some aspects of international tourism are tough to compete with

45 Part Two Supplying tourists and the tourism industry in Northern Ireland

46 Having investigated in Part One the ‘demand’ side of tourism through looking at expenditure by customers, the purpose of Part Two is to set the tourism industry in the context of the supply side of Northern Ireland economy: looking at it as a machine for creating value. To do this we use the new accounting methods of Tourism Satellite Accounting and focus on Gross Value Added as the primary measure of economic output. The diagram below summarises main flows.

Figure 18 Value flows in NI Tourism

Out of State Domestic visitor spend tourism spend

£308 mn £970 mn

Total Tourism Spend

£1278 mn

Direct GVA £423 mn Direct jobs 24200 Indirect GVA £123 mn Indirect jobs 4300 Induced GVA £236 mn Induced jobs 8200

Total Tourism GVA £783 mn

O­o­S* GVA £199 mn Domestic GVA £583 mn O­o­S* Jobs 8000 Domestic jobs 28700

*O­o­S = Out­of­State P195/report/nutshell/execsumm

47 5. Context: the growth and structure of the Northern Ireland economy7 The purpose of the new accounting methods is to enable the tourism industry to be compared with other industries in the economy. Today Northern Ireland has a modern service­oriented economy, but one in which average income and productivity levels are still lower than its neighbours in the UK, Ireland and continental Europe. Figure 19 Northern Ireland real GVA 1967­2004

Northern Ireland Gross Value Added (GDP) in real terms

3.00

2.50

2.00

Northern Ireland

1967=1.00 1.50 UK

Volume, 1.00

0.50 Source: DREAM NI ref NITT5

0.00 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

In 1967 Gross Value Added8 per head of population in Northern Ireland was 63 per cent of the UK average. Over the past forty years it has grown rather faster than the UK. Relative income levels (GVA per head of population) rose to 79 per cent of the UK average in 1997, and are now 80 per cent. Over this period the economy has grown to more than two­and­a­half times its original size and the structure of the economy has changed dramatically. Over the three years 1979 to 1981 Northern Ireland was much harder hit by the effects of tight monetary policy and high exchange rates, so that the engineering and shipbuilding industries led a substantial recession, three or four times as bad as the average for the rest of the UK as it was both longer and deeper.

7 Overall trends in this section are based on UK Regional Accounts from the Office for National Statistics, with pre 1989 figures adjusted for continuity. The detailed structure in 2003 is from the Northern Ireland Social Accounts and Input- output Tables (Volume 3 of this report series) and the detailed sectoral trends are from the DREAM® Detailed Regional Economic Accounting Model for Northern Ireland 8 Gross Value Added is the output of the economy, or the total incomes generated, as measured in the European System of Accounts. It corresponds closely to what was known formerly as GDP at factor cost.

48 Production industries have declined from 39% to less than 20% of the economy

As well as this early­1980s’ recession, production industries of all sorts have declined in relative importance (but rather less quickly in Northern Ireland than elsewhere). Agriculture has grown at only half the speed of the rest of the economy, so its relative size has diminished, and services have grown. Growth was led initially by public services in the early 1970s. A general international trend to increase the public sector was amplified, both as a direct result of the civil situation and as a policy response to some of the economic difficulties it caused. Since then, and especially since 1992, private sector services have been the main component of economic growth, as Figure 20 shows. Population growth has also followed a different pattern from the UK, with Northern Ireland static over the 1970s but growing relatively rapidly since 1980. Figure 20 The composition of GVA 1971­2003

The composition of GVA in Northern Ireland

100%

Mainly public services

80%

Mainly private services

60%

Construction

40%

Production

20%

Agriculture, forestry and fishing

0% Source: DREAM NI ref NITT5/composition 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

49 Figure 21 Composition of UK/NI GVA 2003: 30 industries

Northern Ireland versus UK value added

100%

Other services Other services

Domestic services

Health Health Other services 90% Health

Education Education

Education Government 80% Government Business services

Finance

Government Transport & comms

70% Hotels & catering

Retail & wholesale Business services Construction

Electricity, gas, water 60% Business services Other manufacture

Vehicles

Finance Electrical 50% Finance Machinery Transport & comms Metals

Hotels & catering Transport & comms Minerals

40% Rubber & plastics Hotels & catering Chemicals Retail & wholesale Fuels

30% Retail & wholesale Paper

Wood Construction Leather

Construction Textiles 20% Electricity, gas, water Vehicles Electricity, gas, water Food, drink, tobacco Electrical Vehicles Other mining and quarrying Electrical Rubber & plastics Energy extractive 10% Paper Rubber & plastics Fishing Textiles Paper Agriculture Food, drink, tobacco Textiles Food, drink, tobacco

Agriculture 0% Agriculture Northern Ireland UK D6/ss/summaryni/Ch15

50 This has left the structure of the Northern Ireland economy today, like all western economies, dominated by services, but there are many special features amongst both goods­producing and service industries, summarised in Figure 21 on page 50. The public sector remains particularly large, with both a substantial public administration sector and a dominant public presence in health and education, which are each sizeable in themselves. Business services are very small, and neither are financial services especially significant by UK standards, partly due to the global importance of London financial markets. Road and water transport are very important by UK standards, but the rest of the transport and communications sector, especially railways and telecommunications, are small.

Retail value added in Northern Ireland is proportionally slightly greater than elsewhere in the UK

Retailing is proportionally larger than average, and the hospitality industries are proportionally about the same size as the rest of the UK, somewhat smaller. Construction is sizeable, reflecting the faster­than­average economic growth rate as the economy slowly catches up. Energy industries are big in economic terms (except, of course, for the main sources of primary energy, nuclear, North Sea oil and gas extraction, and coal mining). However, the importance of energy conversion and distribution in value terms is as much a consequence of higher energy prices as greater output levels. In the basic manufacturing sector building materials and man­made fibres are distinctively large but all other industries small. In engineering the Shorts/Bombardier aerospace activity together with some structural steel fabrication and electronics assembly bring Northern Ireland up to match the overall UK average. Other manufacturing is dominated by the very strong presence in tobacco manufacture, with food processing also important and a significant role for timber, paper and printing. In UK terms agriculture is a key speciality of Northern Ireland.

51 Until 2005 unemployment in Northern Ireland remained above the UK average, and participation in the labour market has been relatively low. Productivity, although advancing significantly, is still 13 per cent below the UK average mainly due to the industry mix. There is little representation of the highly capital intensive manufacturing, or highly fashionable and profitable service industries which tend to drive incomes and productivity averages up. There are proportionally more children than in other parts of the UK, tending to increase the proportion of the population not of working age, and the numbers reporting themselves as sick and disabled are high. As the final graph in this section shows, all of these factors combine to position overall household income per inhabitant near the bottom of the UK regional range: only North East England is lower amongst the English Regions and constituent countries, and then by less than one per cent. Figure 22 UK regions’ household income per head of population, 2003

Household income per head of population

18.000

15.660 16.000 14.360 13.910 14.000 12.940

11.690 11.600 11.900 11.660 11.700 12.000 11.260 10.860 10.950

10.000 head per

8.000 £000

6.000 Source: ONS Regional Accounts 4.000 Ref:IND/TTT/Tourism/ origins of ldv/hhinc 2.000

0.000

t t s s n t t s s s d s s d d d d o e n a e mb n a e l n n n a d a a u l E a l l a a n W t l l g h e h E H o t W o h W d d n h r t i i L u c I r t / E t r M M o S o s f u n o S r N k t t o o N r s s S e o a e t h Y E s t W a r E o N

52 6. Industries’ tourism sales, value added and employment This section briefly describes the structure of the industries that supply tourism. Part 1 of the report analysed the internal tourism market in Northern Ireland showing it had a total value of £1278 mn in cash and in kind. Of the £1278 mn, £170 mn is collected in VAT and other taxes, leaving £1108 demand at basic prices. Starting from the spending patterns revealed by surveys, this can be allocated across the 123 products of the UK’s Input­output Classification, indicating that £173 mn of demand is for goods and £935 mn for services. Figure 23 Product pattern of tourist purchases

Products supplied directly to tourists in Northern Ireland

Knitted goods, 16 051 Recreational services, Clothing, 55 318 73 935 Car hire 17 319 Footwear, 11 874 Second homes, 19 716 Petrol & diesel, 30 998 Banking and finance, Telecommunications, 15 859 Motor trade , 21 549 17 413 Wholesale trade, 40 842 Travel agencies &c, 61 714 Other land transport, 19 971 Railway transport, 8 326

Slices broken out are 'tourism characteristic industries' in the Retail trade, 127 575 Tourism Satellite Accounts

Hotels etc, 108 476

Restaurants bars, 363 161 Figures show direct sales to tourists in £000 Hotels, catering, pubs etc, at basic prices (Gross Margins for the distributive trades) 471 638 Source NITSA Note that most food and drink purchases are not sold Ref P195 impact totspend ch2 directly but via the hospitality industries. Main chart total is £1108mn (£1278 mn total spending less £170mn in sales taxes). The distinguishing feature of the tourism industry is that it is defined by the buyer, not the seller. Many industries supply tourists, but especially Θ the ‘hospitality industries’ of accommodation providers, restaurants and bars, Θ the transport industries, and Θ parts of the leisure and entertainment industry and some retailers. Not surprisingly, the hotels restaurant and catering trade emerge as the largest single industrial sector dealing with tourists, accounting for approximately a third of the goods or services purchased. Perhaps more surprising to some will be the fact that the accommodation sector is a relatively small part: this is partly, but only partly, due to the fact that day visits are a large party of tourist demand. It is also the case that restaurants and bars are more service­intensive, and so have grown in relative importance from a cost viewpoint. These industries are discussed in more detail from page 56 under the heading Hospitality industries. Rather less than a quarter of demand falls on the transport industry, or for the purchase of goods (fuel and motoring accessories) and services connected with transport or car hire. Attractions and activities (where paid for) are accounted under Recreational Services. Purchases are assumed to be (based on British evidence) primarily clothing­related with some ‘fancy goods’ or souvenirs.

53 Imports We estimate that about one fifth of the purchases are sourced from outside Northern Ireland. The pattern of these imports is as follows: Figure 24 Imports to meet tourism demand

Figures show imported products net of Imports to meet NI tourism demand taxes and duties Chart total is £253 mn

Figures on data labels are £000

Alcoholic beverages, 6029 Recreational services, Knitted goods, 16033 52184

Clothing, 54920 Car hire 7597

Insurance and pension funds, 6940 Banking and finance, 2914 Telecommunications, 7176 Leather goods, 3419 Footwear, 11871 Printing and publishing, Plastic products, 5562 4449 Fuel 30014

Source NITSA Ref P195 impact totspend ch2(4)

Broadly the imports fall into three categories. Significant tourist purchases of clothing and related items are imported, probably in many cases from the Far East, as are most purchases of such items. Some goods in which variety is important to consumers, such as drinks and printed matter, are traded in many directions. Some goods, notably petrol and diesel, are not made in Northern Ireland, and so have to be imported. Finally there are many services where Northern Ireland does not have the production capacity to meet demand, or the centre of production and of sales within the UK or Europe is elsewhere, and so a significant proportion of the products is deemed to be imported, even though the imports may take the form of within­company transfers.

54 Demand on NI industries Remaining demand falls upon industries in Northern Ireland: Figure 25 Tourism demand on NI industries

Tourism demand falling on NI industries

Recreational services, 21751 Motor trade, 21549 Second homes, 18567 Wholesale distribution, 31584 Ancillary transport services, 61741 Retail distribution, 127517

Other land transport, 19807 Railway transport, 8326

Slices broken out are 'tourism characteristic industries' in the Tourism Satellite Accounts

Hotels etc, 108 476 Figures show direct sales of NI­produced goods and services to tourists in £000 at basic prices (Gross Margins for the distributive trades) Note that most food

Restaurants and drink purchases are not sold bars, directly but via the hospitality industries. 363 161 Main chart total is £855mn (£1 278 mn Hotels, catering, pubs etc, total spending less £170mn in sales taxes Source NITSA 471638 less £253mn imports). Ref P195 impact totspend ch2(2)

After deducting imports, what is left of tourism demand consists primarily of ‘tourism characteristic’ industries and distributive trades (retailing, wholesaling and the motor trades). These comprise 9 of the 123 industries in the classification, and the remaining 114 together make up less than 10 per cent of demand, so most play a very minor role in directly serving tourism. The role of retailing and wholesaling is important because of the high margins on items typically bought by tourists.

55

Hospitality industries The hospitality industries (hotels and other accommodation, restaurants, bars, pubs and catering) make up by far the largest element of the tourism industries and have total sales of £1.35 bn, almost three times as much as they sell to tourists. Of these sales £1.1 bn are captured by the Annual Business Inquiry, and Figure 26 shows the structure of sales across sub sectors, and the disbursement of the sales income within each subsector. The biggest sector is restaurants (which includes carry­out establishments such as fish and chip shops) and bars, each with ABI­ recorded sales of over £400 mn, followed by hotels at £200 mn

Figure 26 Cost structures in NI hospitality industries

Structure of costs in NI hospitality industries, 2003

1200000 Gross operating surplus &other

1000000

Employment costs 2003 800000

600000 Services 2003

400000 Energy & Water 2003

200000 Goods & Materials 2003

0 etc

Bars sites sites, : Hotels

not refuges hostels : Hotels, Catering

pubs catering, Canteens : classified

:

5540 Source : ABI NI Restaurants caravan : 5510

Youth Ref: ABI/Chart 3 (3) Camping Other provision : 5552 lodgings

5551 :

:

mountain

of 5530 elsewhere 5521 and 5522 5523 including

All of the major subsectors of the hospitality industries made a positive gross margin in 2003. In proportionate terms bars added least value to their purchased goods and services, with hotels and restaurants each about the same. Restaurants have probably been the most sensitive to the subsequent rise in energy price. To balance these figures against the visitor spending some adjustments for coverage have to be made, to cater for establishments too small for the ABI, income in kind and other adjustments. For example, after these adjustments the hotels, restaurants and catering sector had sales of £1.35 bn in 20039, which fell into three almost equal parts as Figure 30 demonstrates. The sector has shown rapid growth, its value added in real terms being three times what it was a generation ago:

9 This is the estimate from the Social Accounts and Input-output Tables, volume 3. The Annual Business Inquiry estimate is significantly lower.

56 Figure 27 Hospitality sector real GVA growth

Real GVA in hotels, catering, pubs etc

700

600

500

prices 400 2000 at

300 £mn

200

100

0

71 75 79 83 01 19 1973 19 1977 19 1981 19 1985 1987 1989 1991 1993 1995 1997 1999 20 2003

This is also reflected in physical measures of the sector, such as the bed count: Figure 28 Growth in accommodation capacity

Growth of the accommodation sector in Northern Ireland

18000

16000

14000 Other accommodation 12000 Self catering

10000 Guest houses bedrooms 8000 of Hotels No 6000 Source: NITB Tourism Facts Pre­1990 figures for all categories 4000 are interpolated except for 1968 and 1972, and all pre­1990 guesthouse figures 2000 are estimates

Ref: P195 accommodation/ 0 accomgrth ch1 4 6 8 0 8 2 4 8 68 7 7 7 8 82 84 8 9 9 96 9 9 9 9 9 9 9 9 9 9 1 1970 1972 19 19 1 1 1 1 1986 19 1990 1 1 1 1 2000 2002 2004

or the number of jobs:

57 Figure 29 Employees in the hospitality industries

Hospitality employment

180000

160000

140000 5552 : Catering

5551 : Canteens 120000 5540 : Bars 5530 : Restaurants

100000 5523 : Other provision of lodgings nec 5522 : Camping sites, including caravan sites

5521 : Youth hostels and mountain refuges 80000 5512 : Hotels and motels, without restaurant

5511 : Hotels and motels, with restaurant 60000

40000

20000 z/data/emp/ukgors/ni/nheeni/hospcht

0 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001

An economic history of the industry is beyond the scope of the present report, but it is clear that the industry is prone to relative long periods of stability, which must from a business point of view feel like ‘stagnation’ after they have lasted for a few years, followed by a few years in which expectations are revised upwards and capacity is expanded as fast as resources will allow. In the TSA system Table 6 brings together the role of tourism from both the demand and supply sides. For the hotel industries this suggests that 41 per cent of their activity is serving tourism, and for bars and restaurants 33 per cent.

58 Figure 30 Sources of business for the hospitality sector

Sources of business for the hospitality sector

Other markets, £mn 389

Inbound same­day visitors , £mn 10 Inbound VFR, £mn 51

Inbound holiday, £mn 27

Inbound business, £mn 82 Leisure day visits less than 3 hours, £mn 437 Inbound other, £mn 11

Overnight domestic tourists, £mn 68 Residents outbound, £mn 20

Ref NITSA42003/piehosp Leisure 'tourism' day visits, £mn 260

So of the total sales income of the sector, approximately one third is the subject of this report, of which half is income derived from leisure tourism day visits and half from overnight or inbound visitors. One third is the shorter leisure day visits, which we classified as ‘non tourism’ to conform with GB usage and therefore exclude from direct consideration in the report. One third is other markets, such as routine use of restaurants and bars and non­tourist use of hotels (e.g. conferences) and so on. The ‘third’ covered by this report can be stated more precisely as 39 per cent. 10 For many the idea that the hospitality sector, and especially accommodation, is not ‘all’ tourism may come as a surprise. This is partly because it is a new phenomenon, as there has been an increasing trend for the sector to capture business elsewhere. An idea of trends within the industry can be gained by examining the ratio of overnight visitor spend to the value added in the hospitality sector:

10 Note: these figures are lower than earlier estimates, eg the First Steps project, in part because these estimates are based on industry sales data that has been adjusted upwards to reflect the national accounts, and because the earlier estimates did not take account of imports.

59 Figure 31 Ratio of overnight visitor spend to hospitality GVA 1972­2004

Hospitality industries grow less dependent on the overnight visitor

160%

140% GVA

120%

Out of state visitor spend, mainly 100% overnight but including day trippers hospitality of Domestic overnight visitor spend 80%

60% proportion a as

40% Source: NITB and DREAM

Spend 20% Ref: P195/SocialTrends/Ch1

0%

1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 In gross value added terms the direct GVA associated with tourism is 1.9 percent of Northern Ireland total, reflecting the different cost structures and vertical integration of the different industries.

60 7. GVA comparisons The level of direct GVA calculated for tourism can be compared with other industries, over time, and with other places. Comparisons with other industries should be made on the basis of GVA in the Regional Accounts (workplace basis) which are the framework used in the national accounts.11 Figure 32 Composition of NI GVA 2003

Northern Ireland Industry Gross Value Added (2003) £22198 mn

Education, 1 767

Health, 2 137 Government, 2 402

Other services , 870 Food, drink, tobacco, 1 116 Domestic services, 86 Textiles, 188 Leather, 3 Wood, 112 Business Paper, 281 services , 3 286 manufacturing Fuels, 4 Chemicals, 233 Rubber & plastics, 254 Metals, 213 Machinery , 284 Finance, 996 Electrical, 309 Agriculture, 583 Vehicles, 397 Transport & comms, 1 228 Other manufacture, 136 Fishing, 18 Hotels & catering, 639 Energy extractive, 11 Retail & wholesale, 2 721 Electricity, gas, water, 455 Other mining and quarrying, Construction, 1 676 91 DREAM® Minerals , 223

Thus the £423 mn calculated GVA for tourism makes it bigger than any identified manufacturing industry except for food, about the same size as the energy industries. As a service industry it might be aid to ‘hold its head up’ but it is not especially large.

11 There can be significant differences between Regional Accounts and Annual Business Inquiry estimates. In addition a ‘headline’ version of the Regional Accounts is published but we have used the unadjusted ‘raw’ figures.

61 8. Comparisons over time Trends are not available for the tourism satellite accounts, which exist only for the single year, but it is possible to track how the major industries have evolved over time. This can be compared to the United Kingdom as a whole. Figure 33 Hospitality GVA as % of total GVA: UK and NI 1971­2004

Hotels, catering, pubs etc GVA as % total GVA

4.5%

4.0%

United Kingdom 3.5%

Northern Ireland 3.0%

2.5%

Source: DREAM® 2.0% Ref z/industries/TTT/UKGVA%/H 1.5% osp%2

1.0%

0.5%

0.0%

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 The impact of the Troubles can be clearly seen in the chart, together with some amelioration as the civil situation became calmer. Nevertheless Northern Ireland remains significantly below the UK average. The preparation of two input­output tables for the Republic of Ireland does not allow a trend to be shown, but nevertheless allows two point entries which indicate a similar position there. For Scotland a similar trend to the Northern Ireland one is possible, and even suggests that Scotland may have benefited from displaced NI tourists in the 1970s.

62 The Scottish comparison in particular suggests that a higher percentage of GVA might be achievable here: Figure 34 Hospitality GVA %ge – NI, UK, Scotland and ROI

Hotels, catering, pubs etc GVA as % total GVA

4.5%

4.0% Scotland

3.5% United Kingdom Northern Ireland

3.0% Republic of Ireland

2.5%

Source: DREAM® 2.0% Ref z/industries/TTT/UKGVA%/H 1.5% osp%

1.0%

0.5%

0.0% 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Northern Ireland’s hospitality industries have generated a smaller share of a less prosperous economy, so they have been doubly held back from making their full contribution to prosperity. The shortfall in tourism demand has been a major part of this, but by no means the only factor as the relative movement of the UK and the NI lines shows. More surprisingly the GVA share of hospitality industries in the Republic is about the same, on the evidence we have, as in Northern Ireland. The authors suggest two possible reasons for this, one satirical and one economic. Statistically, it is the case that the Republic’s national accounts are only just moving onto a system based on social accounting matrices, in accordance with EU directive ESA95. One consequence of this system in the UK was to motivate an upgrading of hospitality to allow for value added not captured in the Annual Business Inquiry. It may be that a similar upgrading is to come for the Republic. The economic explanation is that by the time the two data points were recorded Europe’s celtic tiger had long been on the prowl, and it may be that the ‘rest’ of the Republic’s economy had grown sufficiently large to reduce the hospitality proportion. One important conclusion from these graphs is that it is clear that tourism’s share of the economy is by no means a constant number. It varies significantly from year to year, so that if any comparisons are made between places they must be based on the same timeframe. This is done in the next section.

63 9. Direct GVA comparisons across regions Figure 35 Tourism direct GVA as % of total – UK regions and ROI 2003

Tourism GVA as %ge of regional total

4.5%

4.0%

3.5% Source: estimates and updating based on First Steps 3.0% projects

2.5% Ref industry/TTT/UKGVA%

2.0%

1.5%

1.0%

0.5%

0.0%

d t s d ) n d n st st) st ber don e e (est) la Ea ( e h East lan gla t um d Lon s om En le d outh outh West ern Ir Nor North Wesnd H S S Wa ng h a otland ( i rt East Mi West Midlands Sc d K East of e No it n rkshire o U Y Republic of Ireland (est)

Two ‘health warnings’ need to be issued with these statistics. Firstly, all of the figures except the Northern Ireland one were originally estimated for years before 2003. Where (est.) appears then published figures for other years have been approximately updated by cogentsi, and for the English regions the updating has been by DCMS. Secondly, it is not completely clear what the denominator is for the English regions. Although the other TSAs used estimates of GVA from the Annual Business Inquiry, whereas we have used the Regional Accounts, the footnote to the First Steps report indicates that for the purpose of this percentage the Regional Accounts were used. As a check we have compared the hospitality industry percentage and it tells approximately the same story.

64 Figure 36 Tourism vs. hospitality GVA – UK regions and ROI

Tourism and hospitality industries as % GVA

4.5%

London South West 4.0% South East

2003 Wales (est) 3.5% Sources: English regions TSA: First Steps

GVA Republic of Ireland (est) Ireland, Scotland, Wales: First Steps of and cogentsi estimates to 2003 Hospitality: ONS regional accounts 3.0% and CSO IO tables Scotland (est) Northern Ireland: this study North West percentage Ref z/industries/TTT/UKGVA%/Ch1 2.5% East of England East Midlands North East West Midlands Yorks Tourism & Humber 2.0% Northern Ireland

1.5% 2.6% 2.8% 3.0% 3.2% 3.4% 3.6% 3.8% 4.0%

Hospitality %ge of GVA 2003

Although its hospitality industries are not quite so small in comparison, on both scales Northern Ireland is at the lower end. It becomes clear that when put on a comparable basis, the NI tourism industry is contributing significantly less to GVA than in other places, indicating potential for growth. Direct tourism GVA as %ge of total GVA Hospitality Jurisdiction Tourism % %

United Kingdom (est) 3.2% 3.3% Northern Ireland 1.9% 2.9% North East 2.4% 3.1% North West 2.8% 3.3% Yorkshire and Humber 2.2% 3.0% East Midlands 2.4% 2.9% West Midlands 2.3% 3.1% East of England 2.5% 2.8% London 4.2% 3.3% South East 3.9% 2.9% South West 4.1% 3.9% Scotland (est) 2.8% 3.5% Wales (est) 3.6% 3.2% Republic of Ireland (est) 3.4% 2.9%

Source: First Steps, cogentsi estimates and DREAM regional accounts Ref z/industries/TTT/tourism/UKGVA%/sheet1

65 10. Wider effects – supply chains, multiplier effects, and wider economic impacts Figure 37 B2B supply chain for tourist spending

The business­to­business supply chain behind tourism

900000

800000

700000

600000 other food 500000 drink transport

£000 400000 wholesaling retailing hospitality 300000

200000

100000

0 Direct Round2 Round3 Round4 Round5 Round6 remainder ref totspend/ch1 stages in the supply chain

The supply chain behind tourism can be set out as a series of stages. As we have seen, £855 mn finds its way into the sales of local business as a direct result of visitor spend. The businesses that make these sales themselves have to make £194 mn in purchases, of which the biggest single items are food and drink to sell to the visitors via hotels, bars and restaurants. Transport is also a significant input at all stages of the supply chain, which eventually includes at least a small part of every industry. Tracing the supply chain in this way is sometimes known as a ‘Type 1’ multiplier. As can be seen from the chart, after the direct and first round impacts of £855 mn and £194 mn, the four successive rounds of Northern Ireland suppliers sell, £54 mn, £19 mn, £7 mn and £4 mn, with the remaining rounds totalling £7 mn. The sum of all these totals is £1137 mn, or 1.33 times the initial sales, so the ‘Type 1’ sales multiplier is 1.33. Sometimes the multiplier is expressed in terms of the original purchases by tourists, £1278 mn, in which case the value is 0.89. It is important to stress that this multiplier is expressly calculated to reflect the particular structure of tourism spending and the Northern Ireland economy. Many studies of tourism economics use multipliers ‘borrowed’ from elsewhere, and this is rarely, if ever appropriate. There are two additional dimensions to multiplier calculations. For each industry the gross value added associated with sales can be calculated, or the number of jobs. For Gross Value Added the Type 1 multiplier is 1.29 and for jobs it is 1.18. These figures are lower than the sales multiplier because the industries that directly serve tourists have a particularly high ratio of GVA to sales, and a high number of employees for each £ of sales.

66 Secondly there is the ‘Type 2’ multiplier. This takes account of the additional multiplier effect as people working in the supply chain spend their incomes. In the first round £283 mn of employee incomes were earned, in the second £48 mn and so on. When these incomes are spent they give rise to additional sales, GVA, jobs and employment income which, of course give rise to further rounds. The total of these ‘Type 2’ effects is to add £470 mn to sales, £236 mn to value added and 8200 to jobs. Table 2 Tourism multipliers Type 1 effect Type 2 effect Multipliers Total Direct Indirect Total Induced Type 1 Type 2 Note T1+T2

Tourism expenditure 1277658 0.89 1.26 A Tax and imports 423112 Sales 854545 282613 1137158 470158 1607316 1.33 1.88 B GVA 423269 123430 546699 236090 782790 1.29 1.85 Wage bill 282558 70012 352569 121013 473583 1.25 1.68 Employment 24151 4284 28435 8200 36635 1.18 1.52 Employment (FTE) 17957 3821 21778 6673 28451 1.21 1.58

Notes: A: multipliers are output multipliers based on an expenditure denominator, ie treating sales taxes and initial imports as 'leakages'. B are output multipliers based on the output falling on the NI economy. ref P195/ impacts/type2/nutshell From this table we can calculate the number of jobs supported by £1mn of tourism expenditure, as 36635/1278, or 28.7. Of these 18.9 are direct jobs. Different types of tourist spending generate different numbers of jobs, with incoming business tourists generating most work and second home ownership by far the least: Figure 38 Job creation ratios

Jobs per £mn of tourism spend

40.0

35.0

30.0

25.0 induced

20.0

indirect 15.0

10.0

Direct 5.0

0.0 Out of Out of Out of Out of Other out Domestic Domestic Domestic Second Average state state state state of state same­day overnight spending homes in Source: NITSA same­day visitors to holiday business visitors leisure tourists of NI visitors friends and visitors visitors visitors outbound Ref P195/impacts/impactsum relations (tdv) tourist

67 We can also see that the industries in the supply chain are quite different from those directly affected and in contact with tourists. The pie chart Figure 39 (below) is quite different from Figure 25 Tourism demand on NI industries, demonstrating that the indirect reach of tourism is significantly further than is immediately apparent:

Figure 39 Industries in the supply chain

NI supply chain for tourism demand

Recreational services, 13211 Agriculture, 10354

Other business services, Meat processing, 6692 Other food and drink, Market research,7390 12048 management consultancy, 4521 Electricity production and distribution, 8725

Construction, 13147 Figures show indirect sales of NI­ produced goods and services to tourists as traced through the supply chain. in £000 at basic prices . Motor trade, 8333 Chart total is £326 mn

Wholesale distribution, Travel agents, guides & 49199 ancillary transport services, 54434

Other land transport, 18679 Hotels, catering, pubs etc, Source NITSA 7370 Ref P195 impact totspend ch2(2) Slices broken out are 'tourism characteristic industries' in the Tourism Satellite Accounts

68 11. Direct employment The direct GVA percentage of 1.9 per cent translates into a much higher percentage of jobs, 3.2 per cent, because the tourism industries are typically labour­intensive. A majority of the jobs are part time, some are seasonal, and there is a significant proportion of self employed people. The gender balance is also notably more female than the economy as a whole, with a majority of the jobs held by women. Table 3 Direct jobs supported by tourism

Direct jobs supported by tourism Self Full time Total Male, full Male, Female, Female, employe equivale FTE as jobs time part time full time part time d (est) nt % jobs Hospitality 16702 2838 3515 2772 5974 1602 11957 72% Distributive trades 5150 1062 611 948 1837 691 3926 76% Transport 1141 611 63 216 80 170 1069 94% Other services 1005 316 74 285 220 110 858 85% Primary and product ion industries153 88 3 30 9 23 147 96% Total 24151 4916 4267 4251 8121 2596 17957 74% Source: NITSA Ref P195/impact/Totspend/summary This is a summary version of Table 7 of the Tourism Satellite Accounts. More than three quarters of the jobs are in the hospitality industries, and in the UK and in Northern Ireland there has been a downward drift in productivity in this industry Figure 40 Real GVA per job in hospitality industries, 1971­2004, UK and NI

GVA per job

30.000

25.000

20.000 prices) Northern Ireland 15.000

2000 UK (at

10.000 £000 Source: ONS and DREAM®

5.000 Ref P195/ labdemnihoreca/ prodcht

0.000

1 1 5 9 3 7 8 8 99 197 1973 1975 1977 1979 19 1983 198 1987 19 1991 1 1995 199 1999 2001 2003

Possible reasons are an increase in regulation, which may have meant that not only are more people employed (because of working hours legislation, security requirements and so on) but also that there is less casual and hidden employment. In addition, some of the characteristics of demand may have changed, so that hotels now require to allow night access, and there may have been an increasing trend to part time working.

69 Figure 41 Value flows in NI tourism

Out of State Domestic visitor spend tourism spend

£308 mn £970 mn

Total Tourism Spend

£1278 mn

Direct GVA £423 mn Direct jobs 24200 Indirect GVA £123 mn Indirect jobs 4300 Induced GVA £236 mn Induced jobs 8200

Total Tourism GVA £783 mn

O­o­S* GVA £199 mn Domestic GVA £583 mn O­o­S* Jobs 8000 Domestic jobs 28700

*O­o­S = Out­of­State P195/report/nutshell/execsumm

For convenience Figure 41is a repeat of Figure 18.

70

71 Part Three Developing tourism: some options suggested by the statistics

72 12. Returns to tourism investment and development The main findings of this report indicate that tourism activity in Northern Ireland supports: £1861 mn sales net of VAT, £1608 mn from Northern Ireland producers £783 mn value added, or 3.5 per cent of GVA 36 700 jobs, or 5.0 per cent of the posts in the Province These figures include the direct effects of tourism spending itself, the indirect effects felt in the supply chain for goods and services sold to tourism, and the induced effects when people working for tourists or the supply chain spend the incomes they have earned. In order to deliver these estimates a sophisticated set of models was constructed. For a serious evaluation of a proposed tourism investment or promotion initiative then those models should be used. However this note sets out some outline calculations to provide order­of­magnitude estimates of the economic returns from two possible policy initiatives.

Example 1 – Conference Complex For example, if £500 000 per year was expended in support of marketing a conference complex. Suppose this spending generates about 100 000 delegate­days that would not have been there without the promotion. Every appraisal has to begin with such a supposition of marketing effectiveness or additionality: it is entirely contingent on the judgement and common sense of the promoters and project appraisers, supported by whatever evidence they can bring to bear. The numbers they choose are influenced by whatever incentives they may have to exaggerate or to be cautious: does getting a job at all hinge on the promotion being effective? Or does maintaining a contract hinge on exceeding the marketing plan, which must therefore be cautious? The average business visitor (in 2003) spent £50 per night (chart on page 12 of the main report) of which £20 was on accommodation. Conference delegates can be expected to spend significantly more, say £50 per night on accommodation and £90 overall. Thus the 100 000 delegate days would bring in £9 000 000 additional revenue, plus the conference fees (a business­to­business transaction of, say, £70 per day) making £16 mn overall. From the £9 mn, £1.1 mn would be collected as sales taxes, as VAT on goods and services and as excise duties on drink, tobacco and motor fuel. Of the goods purchased, £0.4 mn would be imported, leaving just under £7.5 mn spent directly on the output of Northern Ireland producers. These sales would be comprised of £3.9 mn gross value added, and the remainder purchases. To generate the £3.9 mn GVA, 240 people would be employed, a significant proportion in part­time and temporary jobs, but jobs nonetheless. The remaining £3.6 mn (£7.5 mn ­ £3.9 mn) would go into the supply chain, £0.9 mn of it ‘leaking’ outside Northern Ireland and £2.6 mn being supplied by NI businesses. This in turn would have a supply chain (with ‘leaks’) behind it and so on. The total indirect sales through successive stages of the chain would be £3.5 mn and the value added from that £1.6 mn. The total indirect jobs would be 50. It is noteworthy that it takes about £31 000 of sales to generate a direct job, but £70 000 to generate an indirect job. This is because many of the direct jobs are porters, waitresses, bar staff while the indirect jobs are more representative of the

73 economy as a whole, notably with more manufacturing. Out of all the 240, the direct spend generates only 1 job in primary and production industries (in fact made up of tiny fractions of a job across many industries) while the indirect consequences add up to 19 primary and production jobs. Thus the total direct and indirect value added would be (£3.9 mn + £1.6 mn) = £5.5 mn. The model suggests that £3.2 mn of that would be distributed as compensation to employees (not just wages and salaries but pensions and national insurance contributions, including some payments in kind, especially in the hospitality industries). The other £2.3 mn would be operating surpluses for companies to cover depreciation of the assets they had invested in and a profit margin. Figure 42 Assumed expenditure pattern – conference visitors

Pattern of expenditure ­ conference visitors

taxes on products 4% goods 5% distribution margins 2% Other tourism services 6% Transport inc car hire 4%

Food and drink 15% Accommodation 64%

The Northern Ireland input­output model suggest that each £1 million of household spending results in £98 000 worth of sales taxes, £665 000 sales of Northern Ireland producers and £238 000 worth of imports to Northern Ireland. (£1000 of this total arose spuriously due to rounding­off, but we must also issue a health warning that the import estimates are one of the most uncertain parts of this calculation. They may change as part of the discussion and consultation process of the pilot input­ output tables. The uncertainty arises because of a lack of statistics of trade within the UK, and discrepancies between UK and ROI statistics on trade between the two). Household spending of course has a supply chain behind it, so the rule of thumb is that each £1 mn of spend gives rise to £960 000 NI sales, £460 000 gross value added and 17 jobs. If the £3.3 mn of wages in the conference­support supply­chain flowed directly into household spending they would therefore add £3.2 mn sales, £1.5 mn GVA and 58 jobs. Thus the effect of the centre marketing support if it generates 100 000 delegate days, and excluding the effect via the turnover of the conference promoters themselves, would be £14.6 mn sales for NI producers, £7.1 mn GVA for them and 349 jobs.

74 The if in these calculations is a very big if indeed, and must be wholly dependent on the marketing judgement of the Board. The Board’s best judgement may be significantly less than 100 000 visitor days, in which case it must scale down the numbers here accordingly. A sensible approach would be to ask appropriate marketing specialists what the impact of the support may be, in quantitative terms, without showing them these calculations.

Example 2 – Short break promotional advertising

Visits to Northern Ireland from the Republic and from Great Britain have increased as a result of the peace process, but rather erratically. It is suggested that a significant advertising campaign could help to re­establish Northern Ireland as a destination for short breaks and longer holidays to city and countryside alike. The suggestion is, and again it is a marketing judgement within the purview of the Northern Ireland Tourist Board, that a £1mn campaign might yield 100 000 overnight stays. The average overnight holiday visitor spends about £40, so the assumption is that a total spend of £4mn would be engendered by such a campaign. The pattern of this spending would be different from that for the conference visitors considered above: proportionally more on food, drink and transport, less on accommodation. The economic impact can be summarised in Table 4.

75

Table 4 Impact of stimulating overnight tourism Impact of 100 000 overnights at £40/visitor Direct Indirect Induced Total

Sales of NI producers (£000) 3175 1332 1313 5819

GVA of NI producers (£000) 1663 589 646 2897

Jobs supported 101 21 24 145 Source: NI IO tables and DREAM®impact Ref P193/impacts/repubad

Thus once again, given the marketing judgement on campaign effectiveness, the GVA created would be just under three times the spending on the campaign, and one job would be created for each £6 900 spent.

76 Figure 43 Job creation from a successful advertising campaign

Promotional advertising employment creation in successive rounds

100

90

80

70

60

50

40

30

20

10

0 Round1 Round2 Round3 Round4 Round5 Round6 remainder

77

78 Part Four Tourism Satellite Accounts

79 Tourism Satellite Accounts This section sets out the Tourism Satellite Accounts for 2003 as constructed according to the Recommended Methodological Framework of the United Nations, OECD and Eurostat, the statistical agency of the European Union. Tables in similar format have been prepared for the United Kingdom, Scotland, the Republic of Ireland and many other countries. However relatively full sets of tables for territories and jurisdictions below the level of the sovereign state are rare, and Northern Ireland can be considered amongst the leaders in this respect. Volume 2 provides much more detail about their construction, strengths and limitation. The tables themselves are available in Excel format.

80 TSA Table 1: Inbound tourism consumption, by products and categories of visitors

81 TSA Table 2: Domestic tourism consumption, by products and categories of visitors

82 TSA Table 3: Outbound tourism consumption, by products and categories of visitor

83 TSA Table 4: Internal tourism consumption, by products and type of tourism

84 TSA Table 5: Production accounts of tourism industries and other industries

85

86 TSA Table 6: Domestic supply and tourism consumption, by products

87 TSA Table 7: Employment in tourism industries

88 TSA Table 10: Non­monetary indicators

89 13. References Chapman, Myra and Plain Figures UK Cabinet Office 1986 Basil Mahon

Deegan, Jim, Stephen Northern Ireland Tourism Satellite as above for Northern 2004 Wanhill Martin Account First Steps Project (Final Ireland Tourist Board, Kenneally, Richard Report) Tourism Ireland, Moloney and Donagh Commission of the O’Sullivan European Communities

Deegan, Jim, Stephen First Steps Tourism Satellite National Centre for Tourism 2004 Wanhill: Martin Account Project for The Republic Policy Studies, University of Kenneally, Richard of Ireland and Northern Ireland Limerick, National University Moloney and Donagh (Draft Final Report) of Ireland, Cork, for O’Sullivan: Northern Ireland Tourist Board, Tourism Ireland, Commission of the European Communities

Hayes, Catriona and Development of a Tourism Scottish Executive 2004 Claire Boag Satellite Account for Scotland

Hayes, Catriona and Tourism Satellite Accounts for Scottish Executive 2005 Claire Boag Scotland

Jones, Calvin, Max UK Tourism Satellite Account – Cardiff Business School 2004 Munday, Jane Bryan, First Steps Project Welsh Economy Research Annette Roberts, Iain Unit, Strathclyde University McNicoll, Donald for UK Department for McLellan Culture, Media and Sport

Morgenroth, Edgar North/South Trade: A Statistical InterTradeIreland 2003 and Michael Ground­Clearing Exercise Anyadike­Danes

NIERC Update of Research into the Northern Ireland Tourist 1998 contribution of Tourism to the NI Board economy

Northern Ireland Rising to the Challenge Northern Ireland Economic 1996 Economic Council Council

Northern Ireland Northern Ireland Business Department of Enterprise, 2006 Statistics & Research Insurance Survey 2003­2005 Trade and Investment Agency

Northern Ireland Exporting Northern Ireland Department of Enterprise, 2006 Statistics & Research Services Study 2004 Trade and Investment Agency

Northern Ireland Tourism in Northern Ireland: a Northern Ireland Tourist 2003 Tourist Board Strategic Framework for Action Board 2004­2007

90 Northern Ireland Annual Report and Accounts The Stationery Office (TSO) 2006 Tourist Board 2004­2005

Northern Ireland Survey of Visitor Attractions Northern Ireland Tourist 2003 Tourist Board Annual Report 2003 Board Research & Evaluation Department

Northern Ireland Survey of Self­Catering Northern Ireland Tourist 2004 Tourist Board Accommodation 2002­03 Board Research & Intelligence Department

Northern Ireland Tourism Facts 2003 Northern Ireland Tourist 2004 Tourist Board Board Research & Intelligence Department

Northern Ireland Survey of Guesthouse and Bed Northern Ireland Tourist 2004 Tourist Board and Breakfast Accommodation Board Research Department Annual Report 2003

Northern Ireland Survey of Hotel Occupancy Annual Northern Ireland Tourist 2004 Tourist Board Report 2003 Board Research Department

O’Malley, Dr Eoin and A North/South Analysis of InterTradeIreland 2003 Professor Stephen Manufacturing Growth and Roper Productivity

Scottish Executive, Tourism Framework for Action Scottish Executive 2002 VisitScotland, Scottish 2002:2005 Enterprise Network, COSLA, Scottish Tourism Forum, Highlands & Islands Enterprise, Scotland’s Area Tourist Board Network

TNS Travel & Tourism Great Britain Leisure Day Visits: British Waterways, 2004 Report of the 2002­03 Great Countryside Agency, Britain Day Visits Survey Countryside Council for Wales, Department for Culture, Media & Sport, Environment Agency, Forestry Commission, Scottish National Heritage, VisitBritain, VisitScotland, Wales Tourist Board

91 TTC International Review of Northern Ireland Northern Ireland Tourist 2005 Tourism Statistics Board and Department of Enterprise, Trade and Investment

UN World Tourism Concepts, Definitions, and Madrid 1995 Organisation Classifications for Tourism Statistics. Technical Manual No. 1 UN World Tourism Adapting the National Tourism Madrid 2005 Organisation Satellite Account (TSA) Project to Subnational Levels ­A discussion Paper

UN World Tourism Tourism Satellite Account: UN World Tourism 2001 Organisation, United Recommended Methodological Organisation, United Nations, OECD, Framework Nations, OECD, Commission Commission of the of the European European Communities Communities

92 14. Terms of Reference

Study Aim The aim of this study, jointly commissioned by Northern Ireland Department of Enterprise, Trade and Investment and the Northern Ireland Tourist Board, is to estimate the economic impact of tourism in terms of its wider contribution to the Northern Ireland economy in a manner that is consistent with regional accounts and a Tourism Satellite Account approach. To also provide estimates of the number of jobs supported by tourism, including direct, indirect and induced benefits (identifying appropriate multipliers) and returns on tourism investment.

Study Objectives • To review existing methods of quantifying the economic impact of tourism on regional economies (including the TSA and the NIERC research) and where appropriate build on these models to develop a methodology for estimating the economic impact of tourism in terms of GVA, employment. • To quantify the contribution made by tourism to the Northern Ireland economy in terms of GVA and FTE jobs supported annually from 2000 until 2004 (if possible). • Estimate a tourism multiplier of tourism spending, which combines direct, indirect and induced effects. In addition, the methodology employed to estimate the impact of tourism on GVA and employment should allow: • Isolation of the impacts of domestic and international expenditure as well as day trip expenditure. • Include an estimate of the average return from £1 of direct tourism investment. • Benchmark measures (as outlined above) for Northern Ireland against those developed for comparable regions of the UK and Republic of Ireland, where comparable methods have been used (as far as possible). • Annual updates of the model (the methodology employed should be clearly outlined to allow officials within NITB to update the model). • The potential to develop the model as new information sources become available with recommendations for same. • The potential for sub regional analysis to identify tourism impact in key places or in key tourism sectors. NITB welcomes innovative approaches to this research and does not wish to be prescriptive in the methodology adopted. Information gaps may necessitate best estimates to be used from available sources. However researchers should be aware of the current developments in TSAs across the UK regions and Ireland and the availability of simulated Input­Output tables for English regions which may inform the approach to be adopted for Northern Ireland.

93