com Quantitative Tourism Industry Analysis www.com This page intentionally left blank www.com Quantitative Tourism Industry Analysis Introduction to Input-Output, Social Accounting Matrix Modeling, and Tourism Satellite Accounts Dr. Tadayuki Hara AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEWYORK • OXFORD PARIS • SAN DIEGO • SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO Butterworth-Heinemann is an imprint of Elsevier www.com Butterworth-Heinemann is an imprint of Elsevier Linacre House, Jordan Hill, Oxford OX2 8DP, UK 30 Corporate Drive, Suite 400, Burlington, MA 01803, USA First edition 2008 Copyright © 2008 Elsevier Inc. All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher Permissions may be sought directly from Elsevier's Science & Technology Rights Department in Oxford, UK: phone (44) (0) 1865 843830; fax (44) (0) 1865 853333; email: permissions@elsevier. Alternatively you can submit your request online by visiting the Elsevier web site at http://elsevier.com/locate/permissions, and selecting Obtaining permission to use Elsevier material Notice No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions or ideas contained in the material herein.
Because of rapid advances in the medical sciences, in particular, independent verification of diagnoses and drug dosages should be made British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book is available from the Library of Congress ISBN–13: 978-0-7506-8499-6 For information on all Butterworth-Heinemann publications visit our website at elsevierdirect.com Printed and bound in Canada 07 08 09 10 10 9 8 7 6 5 4 3 2 1 Typeset by Charon Tec Ltd.com Contents Dedication vii Epigraph ix Preface xi Chapter 1 Introduction to Tourism as an Industry 1 1.1 Relative position of the tourism industry in national and regional economies 2 1.2 Difficulty in measuring tourism as an industry 13 1.3 Unique characteristics of the economic impact of the tourism industry 14 1.4 Problems for chapter 1 20 1.5 References and further reading 21 Chapter 2 Introduction to Quantitative Methods for Tourism Industry Analysis 23 2.1 Overview of academic research for hospitality and tourism 24 2.2 Overview of analytical research 24 2.7 References and further reading 38 Chapter 3 Input-Output Model and its Application 39 3.2 Conceptual introduction to simple input-output modeling 40 3.3 Structure of input-output transaction table 42 3.4 Steps from transaction table to Leontief inverse matrix 44 3.5 Multiplier calculations in the input-output framework 54 3.6 Structural limitations of input-output modeling 66 3.7 Applications of impact studies 69 3.8 Varieties of additional concepts on input-output modeling 85 3.9 Questions from students 101 3.11 References and further reading 112 v www.com vi CONTEN TS Chapter 4 Social Accounting Matrix Model and its Application 115 4.2 Conceptual introduction to simple modeling of social accounting matrix 116 4.3 Structure of the social accounting matrix table 121 4.4 Economic impact analysis using social accounting matrix 131 4.5 Applications of social accounting matrix for impact studies 137 4.6 Questions from students 138 4.8 References and further reading 146 Chapter 5 Introduction to Tourism Satellite Accounts 149 5.2 Some key concepts 151 5.3 General compositions tourism satellite accounts 154 5.4 Tourism satellite accounts case studies 157 5.5 Discussions from students 193 5.7 References and further reading 201 Chapter 6 Future Directions and Explorations 205 6.1 Poverty alleviation effects of tourism as an industry 206 6.2 Modeling environmental effect of industrial activities 242 6.5 References and further reading 247 List of Abbreviations 251 Index 253 www.com Dedication The idea for this textbook came to me while teaching a tourism industry analysis course at the School of Hotel Administration (SHA), also known as the Hotel School, at Cornell University. My dissertation committee members, Jan deRoos, Neal Geller from the Hotel School, as well as Walter Isard and Sid Saltzman from the regional science program at City and Regional Planning, helped me embark on my new career as a lecturer and Jim. Susan and Jim Eyster, professor emeritus at SHA, Cornell University, have been my tacit morale supporters all through the process. As a newcomer, I received countless assistance from Sue Okubo and Mark Planting of the Bureau of Economic Analysis, US commerce department.
Both Sue and Mark came to lecture to my students as guest speakers on tourism satellite accounts. David Welch from International Finance Corporation, World Bank Group, provided much moral support for analyzing poverty alleviation through the tourism industry. I feel privileged to be working in a location where I can see the power of tourism as a prime mover of regional economy. I acknowledge moral support from Abraham Pizam, dean of the Rosen College of Hospitality Management, University of Central Florida (UCF), located in the heart of Orlando, one of the most popular tourism destinations in the world.
Deborah Breiter, head of the Tourism, Event and Attractions Department at Rosen College of Hospitality Management, UCF, created an atmosphere conducive to research activities and allowed me to experiment with many unique teaching methods. Interactions with colleagues at UCF stimulated my academic activities and the tourism and hospitality professionals that I meet in Orlando turned out to be surprisingly inspiring. I have been inspired by guidance and advice kindly given to me during many academic conferences in regional science, peace science, hospitality management, and the tourism field. I am much indebted to, and grateful for my interactions with, students at Cornell and UCF, both undergraduate and graduate, as they provided me with immediate feedback, about whether they felt the material was difficult, inspiring, intimidating, fascinating, or boring.
It is to them that I owe the current outlay of this textbook, in terms of user-friendliness. I also wish to acknowledge the support I received from two PhD students at Rosen College of Hospitality Management: from Gerald Kock, for some literature research and candid feedback; and from Manuel Rivera, for some feedback and contribution on poverty issues. I feel indebted to the training that I received by many mentors at my former employers, the Industrial Bank of Japan, (currently Mizuho Corporate Bank), Ministry of Foreign Affairs of Japan, and the Four Seasons Hotels and Resorts. My wife Valeriya and a daughter Julia rendered imputed help by refraining from demanding what a family would normally expect from a father in the summer and week- ends, especially since we live in an area surrounded by theme parks, water parks, attractions, and events, in addition to the natural wonders of Florida.com This page intentionally left blank www.com Epigraph “When I was young, I made my career on steel industries.
If you ask me which industry it would be today, I say tourism. Walter Isard, at the time of the author’s completion of his doctoral dissertation Ithaca, NY, US] ix www.com This page intentionally left blank www.com Preface Tourism is often associated with the pleasure of visiting a place away from home. Many people have some idea about the nature of tourism, although they may not all agree with the same definition. While many people may associate tourism with fun and pleasure, there appears to be a smaller yet growing number of people who are beginning to see its potential as something more serious than a mere object of pleasure.
It seems there is a gap between the existing material for social scientists, such as main- stream economists, and material for hospitality and tourism students and professionals, who wish to study the specifics of tourism as an industry. One economist recently said that due to lack of reliable data, tenure-track economists tend to stay away from the field of tourism and stick to subjects with better data, such as finance, trade, investment, when conducting career- advancing quantitative research. Although more optimistic comments are found on the long-term prospects of tourism as an industry, one example of the skeptical view on the issue is as follows: ‘Tourism economic analysis is somewhat limited by the reliability and validity of the numbers developed by primary research, be they collected privately or by government’ (Lundberg et al. In the meantime, tourism as an industry has been studied by economists from nota- ble international institutions, such as the Organisation of Economic Cooperation and Development (OECD), the EU, The World Bank, the United Nations (UN), the International Monetary Fund (IMF), using the structure called tourism satellite accounts (TSA).
Federal/ national level research on tourism measurements were conducted by the small number of governments including but not limited to Canada, Australia, EU nations, and non- governmental organizations such as the World Tourism Organization (WTO) endorsed the con- cept and have been pondering on how to spread the concepts to larger numbers of audiences. While the history of TSA and the entities that have endorsed the TSA concepts have been rather impressive, the imminent problem is that few hospitality-tourism management schools in North America actually teach the course on the specifics of TSA as a main topic. According to casual conversations with other scholars at tourism and hospitality programs in the rest of the world, the situation outside of the North America appears to be the same in that almost no tourism schools offer the course on TSA. The reason has been rather unclear, but Okubo stated that TSA is based on the input-output (I-O) framework (Okubo and Planting, 1998).
These models are very sophisticated and the standard textbooks about them are usually full of rigorous mathematical explanations. Wassiley Leontief, to whom the development of the I-O framework has been widely attributed, was awarded the Nobel Prize in Economics in 1973, and Sir Richard Stone received the Nobel Prize in 1984 for the application of the social accounting matrix (SAM), which is the extension of the I-O framework.com xii P R EFA C E In addition to technical difficulties associated with the models, we have another problem. Duchin (1998) clearly stated what many economists feel about the I-O model: ‘Despite the award to Leontief of the Nobel Prize in Economics for 1973, input-output economics has failed to maintain the interest of academic theorists, who regard it as a simplistic form of general equilibrium analysis. Curiously, many input-output economists have accepted this indictment.’ I-O/SAM researchers, particularly regional scientists, who are, generally speaking, applied geographical economists, came out recently with rigorous solutions to stimulate and revive the interest in these models.
Unfortunately, few students of hospitality and tourism programs are pursuing these areas of interest, but the emergence of TSA as a method of measuring tour- ism as an industry will sooner or later require that some, if not all of us, study the I-O/SAM. Aim of the book The aim of this book is to contribute towards stimulating those people working in the hospi- tality and tourism area, particularly students and practitioners, towards learning more about the TSAs and their underlying methodologies. Having identified a gap between the level of preparedness of hospitality-tourism students to learn TSA, and the overwhelming contents of generic I-O/SAM materials often written for PhD students in economics and regional sci- ences, my aim is to attempt to fill this gap by familiarizing hospitality and tourism readers with useful applications of the relevant economic modeling, with minimal contents of higher algebra, so that they can understand the concepts of TSA. This book is not able to offer a panacea to all the problems of the tourism industry as an academic subject.
It will most likely offer little new knowledge to advanced economics researchers in the field of tourism, while I sincerely hope that more students in hospitality and tourism programs around the world will be enticed to learn more about required meth- odologies for tourism economic impact studies and TSAs.