Economic impact analysis

There are many economic tools that can be used to measure changes in economic activity to a country due to tourism activities. The most widely used are ones that address changes in sales (or spending), changes in regional income, and changes in employment. Economic analyses can be quite complex, in its most simple form however it can be defined as follows:

Economic impact = Number of Visitors * Average spending per visitor * Multiplier

1. splitting visitors into distinct categories with different spending patterns (e.g. campers, visitors in luxury hotels);
2. measuring spending in discrete spending classes (e.g. accommodation, restaurant meals, gas) and;
3. assigning spending into the economic categories that receive it and subsequently using economic ratios and multipliers applying to those sectors.

The most widely accepted approaches in estimating tourism impacts to a region are based on input output models (representing economic activity flows within a given region). The model describes what each economic sector must purchase from every other sector in order to generate a dollar's worth of goods or/and services. In addition, input output models can estimate secondary effects of visitor spending, often encapsulated in the form of multipliers. Multipliers are usually measured as a ration of total effects to direct effects. Secondary effects can be divided into indirect (differences in sales, incomes or employment in regional sectors supplying goods and services to the tourism sectors) and induced effects (increased regional sales that derive from the spending of household income earned in the tourism/recreation sectors). Other approaches described are: (1) the computable general equilibrium model (CGO) that attempts at incorporating general equilibrium links between production structures, income to various groups, and demand patterns. (2) A study looking at the economic tourism impact in a Brazilian region estimated the regional economic multipliers using a social accounting matrix.

When attempting at calculating the economic tourism impacts to a region the following points merit attention:

1. It is important not to confuse economic impacts with benefits to users. Economic impact assessment studies focus on the actual flow of money into a region rather than the benefits that accrue to the visitors themselves (as measured in economic valuation or cost-benefit studies).
2. One should be careful when using multipliers as they tend to be confused and misused in many recreation and tourism studies. It is best to avoid multipliers altogether and attempt focusing on obtaining good estimates of visitor spending and its effects a given region s economy.
3. It is important to isolate tourist spending from local spending even when local residents constitute a large portion of the "tourists" to an area.