Demystifying the
Tourism Satellite Account
Presented to the
Sustainable Tourism Destination Planning and
Development Laboratory
Blackstone Valley, RI
by
Dr. D. C. Frechtling, Professor of Tourism Studies,
School of Business,
The George Washington University,
May 22, 2008
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Topics for Today
 Concepts of tourism’s economic impact
 Who cares?
 Alternative measurement methods
 The Tourism Satellite Account (TSA) where it came from, what it is, What it
does, what it does not do
 Can there be regional TSAs?
 What about the Rhode Island “2006
Tourism Satellite Account”?
 Recommendations
Q & A
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Who Am I?
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Native of Washington, DC
Economist for U.S. Congress, U.S. Treasury Dept.
Founded the U.S. Travel Data Center and first
Tourism Economic Impact Model in 1970s
President of a hotel marketing firm
Full-time Faculty for the GWU Master of Tourism
Administration degree since 1991
Consultant to the World Tourism Organization
(UNWTO) 1988-2000, on standard tourism
economic impact terms and methods
Member of UNWTO Committee on Economic
Statistics and the TSA since 2002
Visitors, Spending and Impacts
•
“Visitor is a traveler taking trips outside his/her
usual environment [for] less than one year for a
main purpose other than being employed by a
resident entity in the economy (or place) visited.”
(IRTSrev5, ¶2.2)
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•
“Tourism expenditure refers to the amount paid for
the acquisition of goods and services for and during
their trips by visitors or by others for their benefit
through a monetary transaction, for their own use or
to give away.” (IRTSrev5, ¶4.2)
•
“Economic impact studies aim to measure economic
benefits, that is the net increase in the wealth of
residents resulting from tourism, measured in
monetary terms, over and above the levels that
would prevail in its absence.” (TSA-RMF2008, Annex 6)
Visitor Spending is Not Enough!
Internal Tourism Consumption – the most
inclusive measure of the acquisitions by
visitors in an economy, equal to tourism
expenditure plus imputed consumption of
vacation home accommodations, temporary
exchange of dwellings for vacation
purposes, net costs of hosts receiving
visitors in their homes, subsidized
transportation and lodging provided by
employers, and government financing of
certain non-market services for visitors
such as education and recreation services.
(TSA:RMF 2008 ¶¶2.25-26)
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Who Cares About the Economic
Consequences of Tourism?
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Public Officials
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Business owners and managers
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Role in contributing to economic health of community
Residents of host communities
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Value of government funding of tourism promotion and development
Value of partnerships with government and each other
Extent of the network of tourism industries
Employees of tourism establishments
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Benefits to residents of investing in tourism promotion
Benefits to residents of investing in visitor facilities
Importance of salutary visitor policies
Value of partnerships with business
Annual economic contributions of tourism development
Value of receiving visitors
Raise support for government funding and salutary policies
All Boils Down to . . .
 What are the [economic] benefits of
tourism?
 Who receives these benefits (by
industry)?
 How much do they receive?
 How are these changing? –
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
seasonally
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over business cycles
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in response to marketing mixes
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in response to events and shocks
Alternative Estimation Methods
1. Tourism Direct Economic Impact Models
(TEIM) – Travel Industry Association, Dean
Runyan Associates
2. Tourism Satellite Accounts (TSA) – UNWTO
standards applied annually by about a dozen
countries
3. Simulated Tourism Satellite Accounts – World
Travel and Tourism Council, Global Insights
4. Input-Output Models (I-O) – U.S. Department
of Commerce, some individual states
5. Computable General Equilibrium Models
(CGE) – Australia, New Zealand, UK
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TSA Genesis and Pedigree
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TSA authorized by 1993 System of National
Accounts
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World Tourism Organization (UNWTO) led
development with OECD, Eurostat, UN
Statistical Commission and several national
statistical offices
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TSA: Recommended Statistical Framework and
supporting document, International
Recommendations on Tourism Statistics,
accepted by the United Nations in 2008
•
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These documents are the internationally accepted
authority on the TSA
What the Tourism Satellite Account Is
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Tourism = “specific types of trips: those that
take a traveler outside his/her usual
environment for less than a year and for a main
purpose other than to be employed by a
resident entity in the place visited.” (TSA: RMF 2008,
¶2.2)
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Satellite = dependent on and subordinate to a
larger entity, here the 1993 System of National
Accounts
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Account = a set of tables “which records, for a
given aspect of economic life, the uses and
resources or the changes in assets and the
changes in liabilities and/or stock of assets and
liabilities existing at a certain time” (SNA 1993 ¶2.85)
TSA’s Primary Distinguishing Feature
 It is a national Account
•
•
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Demand
Supply
Employment
 The others are Models, “simplified
versions of something complex” (Encarta
Dictionary)
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•
TEIM
•
Simulated TSAs
•
CGE
TSA Produces 4 Macroeconomic Aggregates
1. Internal Tourism Expenditure (ITE) by residents and international visitors
2. Internal Tourism Consumption - ITE
plus value of vacation homes to
owners, residents hosting visitors,
government subsidies of recreation
services, etc.
3. Tourism Direct Gross Value Added - a
measure of income generated
4. Tourism Gross Domestic Product comparable to overall GDP
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Focus on 10 Tourism Characteristic
Products/Industries Sold to Visitors
Standard for all countries
1. Accommodation for visitors (including paid and
imputed rent)
2. Food and beverage serving industry
3. Railway passenger transport
4. Road passenger transport
5. Water passenger transport
6. Air passenger transport
7. Transport equipment rental
8. Travel agencies & other reservation services
9. Cultural industry
10. Sports and recreation industry
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Others can be added by a country
TSA Structure is Tightly Defined
1. Seven interconnected accounts (tables)
2. One additional account for visitor
spending abroad
3. Two additional accounts not yet fully
elaborated: Tourism Gross Fixed Capital
Formation and Tourism Collective
Consumption (government support of
tourism)
4. Table 10 Nonmonetary Indicators of
Tourism - visitors, nights,
establishments
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Essential TSA Structure
Tourism Supply
Tourism Demand
Table 1. Inbound
tourism
expenditure by
products and
classes of visitors
Table 4. Internal
tourism
consumption by
products
Table 6. T otal
domestic supply
and internal
consumption (at
purchasers'
prices)
Table 5.
Production
accounts of
tourism industries
and other
industries (at
basic prices)
Table 2. Domestic
tourism
expenditure by
products, classes of
vistors and types of
trips
Other components
of tourism
consumption: (a)
Services of vacation
accommodation on
own account; (b)
Tourism social
transfers in kind;
(c) Other imputed
consumption
Outputs
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Internal Tourism
Expenditure;
Internal Tourism
Consumption
Table 7.
Employment in the
tourism
industries
Tourism Direct
Gross Value
Added
(TDGVA);
Tourism Direct
Gross
Domestic
Product
(TDGDP)
Gross Value
Added of the
Tourism
Industries
(GVATI)
Tourism
Direct
Employment)
What the TSA Can Tell Us
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Tourism’s contribution to the national
economy
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Gross Domestic Product
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Employment
Value added by the tourism industries
compared to other industries
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Additional value created by production
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A measure of incomes: labor, profits, interest,
dividends, rent
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Can break out individual tourism industries
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Annual change in size and contribution
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Tourism’s economic contribution compared
to other countries
What the TSA Cannot Tell Us
 Return on Investment in plant and
equipment
 Variations in business receipts or profits
 Government revenue generated by
tourism
 Monthly or seasonal changes
 Variations over the business cycle
 Impact of special events and shocks
 Multiplier effects through indirect and
induced spending
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Regional TSAs
 UNWTO recognizes concept and its
value
 But here is no conceptual framework
comparable to 1993 System of
National Accounts
 Two competing approaches possible
 Inter-regional (top-down)– derived from
the national TSA, outputs consistent with
national totals
 Strictly regional (bottom-up) –
development from ground up with or
without reference to the national TSA
structure and definitions
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Regional TSAs
 Other conceptual difficulties
 Not all variables can be represented at
the regional level, e.g., international
imports and exports
 Not all variables can be regionalized, e.g.,
inter-regional transport, national
government activities
 Heavy data requirements, few resources
 But progress at hand: INTERNATIONAL
CONFERENCE
MEASURING TOURISM ECONOMIC
CONTRIBUTION AT SUBNATIONAL LEVELS, Malaga,
Spain, 29-31 October 2008
http://www.iafet.com/inicio.asp?idioma=ing
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Strictly Speaking, 2006 Tourism Satellite
Account for Rhode Island is not a TSA
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UNWTO does not sanction regional TSAs yet
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TSA-RI does not follow UNWTO principles for a
TSA –
 Accounting exercise, not modeling
 Elaborate seven interconnected tables
 Focus on tourism characteristic products and
activities
 Present four main aggregates (now conflates
tourism value added and Gross State Product)
 Limit to direct contributions only (excluding
multiplier)
 Limit to “tourism” effects
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But the Global Insights Report Provides
Useful Information on Visitor Impact
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Visits
Expenditures
Employment
Wages
Taxes
Broken down by sub-state regions
 Visitors
 Expenditures
 Indirect effects
These help answer the questions that
a TSA cannot
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Recommendations
 Term the Global Insights study for Rhode
Island a “simulated tourism satellite
account” for the state with the focus on –
 Four TSA macroeconomic variables
 Adopting same set of industries as U.S. Travel and
Tourism Satellite Account (USTTSA)
 Adopting other USTTSA definitions and
conventions
 Provide the additional data on Rhode Island
as outside the TSA structure
 Visits, wages, taxes, indirect effects generated by
visitors
 Sub-state regions
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 Eliminate the “under 50 mile” generated
activity: this is not tourism!
Expected Results
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Valid comparisons with national TSA
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Valid comparisons with other states that pursue
UNWTO approach
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RI tourism industries’ contribution versus other
industries’
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Consistent measurement over time
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Supplemental data useful to tourism business
managers
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Improve understanding of Tourism’s impact in the
state for
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Government officials
Business owners
Managers
Residents
Questions?
Doug Frechtling
Department of Tourism & Hospitality Mgmt.
George Washington University
Office telephone = 202-994-4456
Email = frechtli@gwu.edu
Website = http://home.gwu.edu/~frechtli
Department website = www.gwutourism.org
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