Tourism Satellite Accounts: Progress in Wales and the UK

Feature Article

Calvin Jones, Welsh Economy Research Unit, Cardiff Business School

Introduction and Background: tourist purchases an item of clothing in EUROSTAT have adopted the method as

Measuring the Tourism Economy a Welsh shop for £50, it is only the retail the most appropriate way of assessing

This paper reports on a project margin which directly supports the economic contribution of tourism for undertaken in Wales, to develop a economic activity in Wales. The value- nation-states.

Tourism Satellite Account (TSA). A TSA added associated with the production of is an extension to a set of national (or in the imported good itself, and any sales A Satellite Account is an extension to a this case, regional) accounts that taxes, leave the Welsh economy. System of National Accounts (SNA) enables, for the first time, a consistent which enables an understanding of the comparison of the value of tourism with Equally, counting up all employment in size and role of economic activity which other economic activities, and with ‘tourist related industries’ such as hotels is usually ‘hidden’ with such accounts. tourism elsewhere. or recreation will also be inaccurate. For example, an SNA will not distinguish

Such measures ignore that some between a newspaper purchase by a

The measurement of tourism in employment in other industries is tourist or by a local resident. Within the economic terms has historically been dependent upon tourism, and TSA these purchasing groups are very difficult. This is because tourism is conversely, that not all employment in separated (usually tourists are further not an industry (in the same way as, tourism industries will be tourism- separated into different types). This say, electronics, or insurance for dependent if industry sales rely in part enables the estimation of key variables example). Rather, a wide range of on the purchases of people who are not such as how much individual industries products is purchased by visitors from visitors (for example in the case of a depend upon tourists, and, by their destination (in this case Wales) hotel bar used by local residents). extension, how much value-added and before, during and after any tourist visit. employment is supported by tourists.

It is the economic value (to Wales) of all The Tourism Satellite Account The first pilot set of accounts was these purchases made, and the In order to overcome the measurement developed for the UK during 2004. employment dependent upon the difficulties outlined above, the World production and distribution of these Tourism Organisation (WTO) has The TSA as suggested by WTO and goods, that we should think of as the championed the development of the EUROSTAT consists of ten tables, though

‘tourist economy’. Tourism Satellite Account (TSA). The only eight are recommended as

TSA enables us to measure the true currently suitable for development

Following the above, measures of the economic ‘worth’ of tourism, and for the (there remain unresolved issues with economic importance of tourism which first time to examine the nature of TSA Tables 8 and 9), and only six are rely only upon enumerating visitor value-added due to tourism. The TSA considered ‘core’ tables (TSA Table 7, expenditure will be misleading, as not all method also enables us to estimate with employment and TSA Table 10, non- expenditure will be on Welsh goods and some accuracy how much employment monetary indicators, are not directly services, and hence not all expenditure is dependent upon tourism. WTO, the linked to the SNA) The illustration below will support Welsh incomes and Organisation for Economic Co-operation outlines what information is contained in employment. For example, when a and Development (OECD) and the TSA.

Table 1- Tourism Satellite Account – The Constituent Tables

TSA Table Coverage Notes

1 Inbound tourism expenditure Part of aggregate demand; i.e. an export

2 Domestic tourism expenditure Part of domestic total consumption

3 Outbound tourism expenditure Not generally linked to other TSA tables so is

often not estimated

4 Domestic ‘tourism final consumption’ Synthesised from Tables 1 & 2

5 Production of tourism commodities For example the services and products of ‘tourist

related’ industries but also of non-tourist related industries

6 Domestic supply & consumption A reconciliation of Tables 4 & 5. The heart of the TSA

by product

7 Employment & labour use Structure not yet fully agreed

8 Tourism Fixed capital formation

(investment) Not currently reported

9 Tourism Collective Consumption Not currently reported

10 Non-monetary Indicators e.g. tourism volumes/nights; types of tourist etc.

Structure can reflect most useful indicators

20 Feature Article

Many nations have developed pilot visitor spending, 64% was holiday Around 9% of sales in the retail and accounts, including, as stated, the UK in related, 20% business tourism and 16% distribution sector, including motor fuel

2004. However, few regions have Visiting Friends and Relatives (VFR) and sales, are tourist-dependent. developed TSAs; those in Norway and other (tourism day-visit spending is all Comparison with figures for the UK

Canada, and several in Spain. However, leisure-related). reveal that the accommodation and even here regional results are usually restaurant sectors in Wales are more top-down allocations of national totals Comparison of tourism spending in dependent on tourists than in the UK as rather than ‘bespoke’ regional tourism Wales with the output of tourism related a whole (although proportionately accounts. Recently, work has been industries in Wales provides us with an smaller), whilst transportation sectors in undertaken in Wales and Scotland to estimate of direct tourism-related value- Wales are far less tourist dependent. develop ‘bespoke’ TSAs for these added. For 2000, this was estimated at regions. £1.1bn . This was 3.7% of whole- This latter finding is probably explained

economy value-added in Wales in that by the relative lack of non-road

The Tourism Satellite Account for Wales year. It is important to remember that transport infrastructure in Wales, and is, then, along with the Scottish account this figure does not include indirect the consequent reliance by tourists on developed in 2004, innovative and value-added that occurs, for example, in private transport. It also illustrates that novel. The Welsh TSA is in its second the supply chain as tourist-facing a proportion of tourism value-added iteration and (like the UK and Scottish businesses purchase goods and services arises from well-developed international accounts) relates to the year 2000, from other Welsh businesses (Table 3). transport infrastructure (air and although key estimates have been seaports).

‘rolled forward’ to 2003. As with the UK The TSA also tells us how dependent project, year 2000 was chosen to different industries in Wales are upon Tourism-Dependent Employment in provide a “benchmark” year prior to the visitor spending. Different industries sell Wales upheavals of foot and mouth and different proportions of their If we apply the tourism ratios outlined th September 11 2001. commodities to tourists. Important above to the different industries which

products in this respect include: produce those commodities (often more

The Welsh Tourism Economy • Accommodation (serviced and non- than one industry will produce a

Results from the TSA show that in 2000, serviced) (85% tourist-dependent) commodity) we can estimate the total visitor expenditure in Wales was • Restaurants and bars (51%) amount of employment which is

£3.5bn . The most important portion • Transportation services (10%) dependent on tourism in Wales. was that due to day visitors at £1.5bn. • Recreation (8%) Typically, not all jobs in a given “tourist”

The TSA estimates that, of non-day • Tourist attractions (100%) industry are tourism-dependent as

Table 2 - Tourism Consumption by Purpose of Visit (2000)

Purpose of visit £m

Holiday Tourism 1,220 64%

Business Tourism 390 20%

Visiting Friends and Relatives/Other 300 16%

Spending by Welsh residents before a trip abroad 130 -

Day Visitors 1,450 -

Total Tourism Consumption 3,495 -

Table 3 - Derivation of Tourism Value-Added from Gross Visitor Consumption

21 Feature Article

Table 4 - TSA Results – British Isles Comparisons (2000)

Wales Scotland Ireland* UK

Tourism Consumption £3.5bn £7.4bn €6.8b £90bn

Tourism Gross Value-added 3.7% 3.0% 3.8% 2.9%

(% of economy) (3.8%*)

Tourism Employment 76,000 130,000 147,000** 1,260,000

(as % of all workers) 6.2% 5.0% 8.6%** 4.7%

*Scottish GVA re-worked on same basis as UK & Wales

**Ireland employment estimates include indirect employment thus not comparable.

Abstracted from DCMS (2004); Hayes and Boag, 2004; Deegan et al. 2004

some turnover and hence incomes will concentrated much more in ‘hospitality’ spend their wages, there will be indirect depend on non-visitor demand. sectors such as accommodation, food (supply chain and wage-related)

and retail than for the UK, where impacts.

The TSA for 2000 gives an estimate of transport services are proportionally

76,000 tourism-dependent workers in more important. This is because Wales We are unable to estimate indirect

Wales for this year, including self cannot lever much of the spending value-added and other variables without employed and owner-managers. This associated with international arrivals or further manipulation of the TSA. This comprises around 6.2% of all workers inter-regional public transport due to manipulation essentially turns the in Wales. If we convert this to full-time the lack of infrastructure in the region. tourism ‘account’ into a tourism ‘model’. equivalent jobs, we achieve an estimate This Personal Computer-based model is of 59,000 FTEs or 5.5% of all FTEs in Tourism in Wales Since 2000 known as the Tourism Impact and

Wales, showing that tourism-related Although the TSA is benchmarked to Planning Model for Wales (TIPM ). Its employment is relatively more seasonal year 2000, key estimates can be ‘rolled development is crucially dependent and/or part-time in nature. By far the on’ using more recent information on upon the Welsh TSA but it is important largest portion of tourism dependent tourism consumption. Undertaking this to remember that the TSA and TIPM are jobs are in restaurants and bars, at exercise illustrates the difficulties not the same: TIPM is a modelling tool

29,000. Meanwhile, in hotels and other experienced by the sector during 2001 which requires some restrictive accommodation, 18,400 jobs are and 2002, when tourism gross value- assumptions that are not needed for the tourist-dependent. added dropped from £1.12bn to TSA.

£1.07bn before recovering to perhaps

It should not be forgotten that the £1.14bn in 2003. This real decline in The modelling of tourism in Wales above figures relate to direct tourism consumption has meant that for indicates an overall (direct and indirect) employment only, and do not take 2003, the best estimate of tourism gross total for Welsh tourism value-added of account of multiplier effects which are value-added as a proportion of whole £1.7bn . Thus, the direct and indirect discussed below. economy is 3.3%. During this period, impact of tourism in Wales in 2000

tourism dependent employment amounted to around 5.6% of Welsh

The figures above imply that tourism is declined by an estimated 3,000 jobs value-added. more labour intensive (and hence lower although employment has since value-added) than most other industries recovered to beyond its level in 2000. TIPM allows us to examine the indirect in Wales. However, this varies widely effects of tourism activity in other ways, across tourism industries, with transport Modelling the Impact of Tourism on including the impact upon incomes and sectors in particular having very high the Rest of the Economy employment, and output or profits of levels of value-added per employee. The key results from the TSA are Welsh-based companies. For example,

interesting and informative, telling us as directly and indirectly, tourism

Comparative Statistics: Wales and they do about the overall levels of direct supported 80,000 FTE jobs or 7.5% of the Rest of the British Isles tourism value-added in Wales, this Welsh FTE employment in 2000.

Results from TSAs undertaken totalling £1.1bn in 2000 and comprising elsewhere suggest that the tourism 3.7% of all value-added. However, this Future Development of the Welsh economy in Wales is, in terms of relative is not the full extent of tourism’s impact. TSA scale and importance, much the same As tourism industries demand inputs to The Welsh Tables are now fully as for Scotland and the UK as a whole. service the needs of their customers, consistent with EUROSTAT and World

However, in Wales value-added is and as workers in tourism industries Tourism Organisation concepts,

Table 5 - Estimated Tourism-Dependent Employment in Wales, 2000-2003

Year Persons FTEs

2000 76,300 58,800

2001 75,800 58,400

2002 72,700 56,100

2003 77,900 60,000

22 Feature Article

Table 6 - Key Results from the Tourism Impact and Planning Model for Wales

£m 2000 Direct Indirect Total Multiplier Approx %

of Wales

Output/Demand 2,080 1,220 3,300 1.60 -

Gross Value-added 1100 610 1,710 1.55 5.6%

Employment (FTEs) 58,800 20,840 79,740 1.35 7.5%

Notes:

The figures here are not identical to those reported in the Wales TSA due to the algebraic manipulation necessary to

achieve economic multipliers.

Figures will not add due to rounding

definitions and methodology, with Wales timely indicators of industry progress. base, given their relatively low level of perhaps one of the first regions globally Whilst Wales does not currently have a resources and lack of direct influence on to reach such a stage. Recent similar GVA time-series, the next phase the priorities of the Office for National refinement of the TSA in Wales has of work will investigate the applicability Statistics. The devolved authorities and included; of this work and that undertaken agencies in Wales and Scotland have

• Disaggregation of tourism products, elsewhere to the Welsh case. meanwhile been more successful in

to report guest houses/B&Bs and identifying increases in resource for

non-serviced accommodation Sub Regional Indicators – Tourism is basic data collection and analysis which

separately (not available at UK an extremely uneven activity in Wales forms the basis for the TSA and,

level) and it is likely that for many coastal and potentially, other high-value outputs.

• Limited disaggregation by purpose rural areas (including some of the most

of visit; holiday, business and deprived) tourism comprises a far Conclusions

VFR/other higher share of GVA than for the nation With its adoption by OECD, World

• Development of TSA Table 7 – as a whole. It is difficult to assess this Tourism Organisation and EUROSTAT,

Employment in tourism industries contribution at present. The next phase the TSA has emerged as the only

of the report will examine internationally acceptable way to

There are a number of areas where the methodologies to produce “key” TSA measure the economic significance of

TSA can be refined to provide more estimators for sub-regions of Wales, tourism. At a TSA conference in policy-useful information and contribute including value-added and tourism November 2004, EU representatives more fully towards tourism strategy and industry employment. It is not possible made it clear that member states would planning in Wales. These developments (or desirable) to produce full TSAs for in future be required to provide vary in cost and benefits, and sub-regions as the cost and data information to EUROSTAT that would be discussions with WTB will decide the implications would be extremely of use in constructing TSAs. Thus, most appropriate next steps. However, significant. development of these accounting issues under consideration are detailed systems within the UK may be important in the following paragraphs. Progress in the Rest of the UK in justifying future funding and support

As noted earlier, pilot TSAs have been for tourism activities and facilities,

Improved Consumption Data – Data developed for both the UK and for including EU grant aid. on tourists’ spending are not reliable Scotland. Also during 2004, pilot studies and accurate at the UK-regional scale. were undertaken for the Crown It is clear that Wales and Scotland are

However, in 2005 WTB will likely Dependencies (Jersey, Guernsey and ahead of other regions in the UK (and undertake primary research to the Isle of Man), Northern Ireland and arguably the UK itself) in TSA supplement existing national surveys. for English Regions. In each of these development. English regions will find it

The next iteration of the TSA will use cases it is not currently possible to difficult to keep pace unless underlying any new data to improve estimates of develop a full TSA as they do not benefit statistical systems (that is, well overall visitor consumption and hence from the economic accounting developed sets of regional accounts) key headline outputs such as tourism structures that are available for the UK, improve markedly, either as provided by value-added and tourism-dependent Wales and Scotland. the Office for National Statistics, or as employment. individual Regional Development

It is difficult to envisage much further Agencies commission or undertake this

Timely Indicators – The full TSA is progress in English Regions in particular fundamental work. However, the strong only available several years after its without a significant increase in the level support for the method by the Board on

“reference year” and even annual of resources allocated to both tourism the one hand, and VisitScotland and the estimates are often more than a year consumption data and regional Scottish Executive on the other, out of date. Work is underway in accounting in England. So far, there is suggests that, in the short term at least,

Scotland which seeks to link TSA little evidence that Regional the statistical and analytical gap may outputs with quarterly estimates of Development Agencies can lever this widen further. value-added in the economy to provide kind of improvement in the statistical

23 Feature Article

Endnotes: Selected Bibliography: EUROSTAT (2003) European

The TSA project is funded by the Wales Implementation Manual on Tourism

Tourist Board (www .wtbonline.go v.uk ) Allnutt D. (2004) Tourism Statistics Satellite Accounts and the first iteration was undertaken in Improvement Initiative: Review of conjunction with Prof. Steve Wanhill and Tourism Statistics Department for Hayes, C and Boag, C (2004)

John Fletcher of Bournemouth Culture, Media and Sport, Development of the Tourism Satellite

University. Any errors and omissions, www .culture.go v.uk Account for Scotland, Scottish Economic however, are the current author’s. Statistics 2004, pp 12-28. HMSO

Department of Culture Media and Sport Edinburgh.

The research team are extremely (2004), First Steps Tourism Satellite grateful for the significant Accounts Project, report by Cardiff Jones C., Munday M. and Roberts A. methodological support, invitations to Business School; www .culture.go v.uk (2003) Regional Tourism Satellite technical workshops and much general Accounts: A Useful Policy Tool? Urban encouragement from Antonio Massieu, EUROSTAT, OECD, UN & WTO (2001) Studies, Vol. 40, No. 13, 2777–2794.

Marion Libreros and others at WTO. Tourism Satellite Account:

Recommended Methodological

Framework

Welsh Economic Review 17.1 SPRING 2005 24