Key words: economic impacts; Qingdao; Input-output analysis.
1. Introduction
Tourism has now become the largest economic activity in the world, whose impact on the global economy is widely recognized. It is estimated that tourism generates between 3% and 5% of the world’s GDP (Alejandro M., 2001) and directly employs 200 million people (WTO, 2002). Trips abroad have multiplied by twenty-five since the 1950s, whilst in 2000 the income generated by these trips reached a figure two hundred times higher than that of 1950, which is the fastest growing activity in the second half of the last century, and the knock-on effects of this demand influence almost all of the other economic branches. Additionally, it is forecast that the growth rate for trips abroad will rise by 4% in real terms until the year of 2011, with a subsequent increase in the tourism industry’s share of international output and employment (World Travel and Tourism Council, 2002).
Therefore, tourism’s economic impacts are an important consideration in state, regional and community planning and economic development. A variety of methods, ranging from pure guesswork to complex mathematical models, are used to estimate economic impacts of tourism. Each type of analysis is identified by the basic question(s), it answers and the types of methods and models that are appropriate. Economic impact studies provide information to help decision makers better understand the consequences of various actions on the tourism industry as well as on other sectors of the economy. The aim of this paper is to find out how important the tourism industry is to the Qingdao economy by estimating the multiplier effects of tourism expenditure on total output, income and employment and assessing the direct, indirect and induced effects of tourism expenditure on different sectors and industries.
2. Local Economic Impact-Case Study on Qingdao
2.1. Methods for Estimating the Economic Impacts of Tourism
2.1.1. Basic Methods
This study uses input-output analysis to evaluate the status and importance of the tourism activity on Qingdao economy, which is a common method used for this kind of problem. The I/O model produces a structural model that illuminates the interactions among inter-industries within a region and measures impacts because these relationships largely determine how regional economies are likely to respond to project and program changes. It provides impact estimates in a general equilibrium framework instead of single-market analysis. An input-output model can measure both the relative sizes of sectors that make up the economy and the linkages among them. So it is expected to provide comparable results to other states’ research. But researchers in different countries adopt different methods to assess the economic impacts of tourism industry in the specific region (Friedrich Wu, 2002).
Generally, Total Economic Impact equals to
Number of Visitors * Average Spending per visitor* the specific regional Multipliers
Ø Visitors are divided into five segments with distinct spending pattern: day trips, and overnight trips staying in motels, campgrounds or with friends and relatives.
Ø Visitor’s spending includes 12 spending categories, namely, Lodging, Restaurant, Groceries, Gas & oil, Amusements, transportation, manufacturing, apparel, retail trade, wholesale trade, sports goods and all the other miscellaneous goods.
Ø The item multiplier includes sector-specific economic ratios and multipliers, which are extracted from input-output models to translate spending into sales, income and jobs and to estimate tourism's multiplier effects.
A standard economic impact analysis is distinguished by direct, indirect and induced economic effect. The total economic impact of tourism is the sum of direct, indirect and induced effects within a region. Any of these impacts may be measured as gross output or sales, income, employment, or value added.
2.1.2. About Multipliers
The multiplier measures the impact of extra expenditure introduced into an economy. It is therefore concerned with the marginal rather than average changes. In the case of tourism, the extra expenditure mainly represents the tourist expenditure in a specific region. As many tourism analysts do not understand how multipliers vary across regions and sectors and are unfamiliar with input-output models, Multipliers used in economic impacts analysis models of tourism activity have many abuses and misuse, including: multipliers used in the model do not represent the region of interest, usually applying national or state level tourism multipliers to sub-state regions, many tourism studies use "off-the-shelf" multipliers from previous studies, often without understanding that multipliers tend to vary considerably across region and sectors (Chang, W. H., Jackson, R. S., & Stynes, D. J. 1999).
Nevertheless, regional input-output (I-O) multipliers, which account for inter-industry relationships within regions, are useful tools for conducting regional economic impact analysis, determining how regional economies are likely to respond to project changes. These are output, income, or employment multipliers.
2.1.3. Local Expenditure
Expenditures are estimated mostly through surveys, which usually select restaurants, retailers and taxi drivers. Since economic impacts are essentially associated with additional “new money” generated, it is difficult to isolate purchases specifically attributable to tourists and residents, so the result of the survey is unsatisfactory.
However, it is not uncommon to come across studies that rely on surveys of spectators without distinguishing between spending by tourists and residents (Foley, 1991 and SQWL, 1995). A few have relied on gross tourist expenditure (foley, 1991), and the accuracy of economic impact measures could be improved by including residents in surveys.
Since economic impact results from "new money" spent by tourists, when establishing a working definition of the "local economy", the location should be large enough to constitute a viable economic region for which a meaningful economic impact analysis can be undertaken. Expenditure by non-local domestic spectators is a gain from the point of view of the community. However, from a national viewpoint, tourists from other domestic locations are simply "switching expenditure" from such places to the host region (Stynes, 1999a).
Generally, the ration of the latter to tourist spending is called the “capture rate”. As a rule of thumb, only 60-70% of tourist spending appears as final demand in a local region (Stynes, 1999b).
2.2. The Case Study -Qingdao
The city of Qingdao is located at at the southern tip to Shandong Peninsula, lying in jiaozhou Bay facing the Yellow Sea. The city has seven urban districts and five county level cities under its jurisdiction with an area of 10,645 square kilometers and a population of 6.84million.
The uniqueness of the city consists in its architecture and an attractive urban landscape. With its wealth of natural and human resources, its year-round schedule of tourist festivals and events, coupled with many tourist facilities and an extensive transportation network. As an important open coastal city in China, Qingdao is a famous resort with a long culture history, which is considered an ideal destination by tourists both at home and abroad, and it was selected to host the sailing events during the 2008 Olympic Games Beijing (Qingdao Economic Research Center, 2004).
In the year of 2002, Qingdao received 18,367,000 domestic and overseas travelers and 417000 persons from offshore, 18.2% up and 29.2% up over the previous year. Total income of tourism was RMB15.5 billion, 27.6% up. Foreign exchange earnings of international tourism reached USD240 million, 35.1% up.
According to the basic equation of Input-output Model as follows:
AX+Y=X
A=[a11 a12 … a1n]
[a21 a22 … a2n]
[a31 a32 … a3n]
[……………]
[an1 an2 … ann]
X=[X1] Y=[Y1]
[X2] =[Y2]
.
.
[Xn] =[Yn]
getting
The middle demand rate of tourism affecting product
| Sectors | Middle demand rate |
| Lodging | 0.8260 |
| Restaurant | 0.2532 |
| Groceries | 0.5861 |
| Public service | 0.4379 |
| Amusements | 0.7895 |
The final products driving coefficients
| Sectors | Middle demand rate |
| Lodging | 1.265 |
| Restaurant | 1.2870 |
| Groceries | 0.8625 |
| Public service | 1.1360 |
| Amusements | 1.1835 |
The Direct Output Multipliers by Tourism
| Sectors | Multipliers |
| Lodging | 2.5632 |
| Restaurant | 2.8701 |
| Groceries | 1.5620 |
| Public service | 2.1630 |
| Amusements | 2.5170 |
The Direct Income Multipliers by Tourism (including Taxes)
| Sectors | Multipliers |
| Lodging | 0.2544 |
| Restaurant | 2.8701 |
| Groceries | 0.0823 |
| Public service | 0.1103 |
| Amusements | 0.1865 |
The Direct Employment Multipliers by Tourism
| Sectors | Multipliers |
| Lodging | 0.4563 |
| Restaurant | 0.4952 |
| Groceries | 0.1724 |
| Public service | 0.3126 |
| Amusements | 0.5187 |
Note 1: Data used for this study were collected through visitor surveys and the Tourism Yearbook.
Note 2: As China encountered SARS in the year of 2003, whose tourism industry dropped dramatically, so this paper uses data of 2002.
3. Conclusion:
The total valued added of tourism in Qingdao in 2002 was about USD6.02 billion; jobs created by tourism industry amounted to 62552, the percentage of direct effects of jobs was about 3%; the percentage of the total income by tourism in Qingdao economy in 2002 was 9.8%.
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h.D Shaohua Yi
Associate Professor
Institute of Finance and Trade Economics,
Chinese Academy of Social Sciences, Beijing, P.R.China, 100836
Email yishaohua@yahoo.com.cn