The economic impact of tourism in the European Union

This report has four main goals: • To assess the scientific and policy literature related to the economic impact of tourism (with a specific focus on the European Union), in order to classify and evaluate the different methodologies and approach hes used so far; • To scan data (specially on Tourism Satellite Accounts) for each of the 28 EU countries in order to highlight gaps in data availability and reliability, and to define the minimum common denominator needed for computing the indirect and the total economic impact of tourism; • To identify and develop a sound methodology to compute indirect and total impacts of tourism (on domestic output, on value added and on employment) using available data from Tourism Satellite Accounts and Input-Output Tables for a pilot set of countries; • To collect, compare and analyse figures on the economic impact of tourism in the EU to provide a useful statistical tool able to inform stakeholders, practitioners and policy makers and to guide policy analysis in the field of tourism economy. The main findings can be summarised as follows: i The recognized standard for estimating the direct economic impact of tourism (the Tourism Satellite Account) has been regularly used and merged with Input-Output models or with Computable General Equilibrium models in the last 20 years, to estimate the total economic impact of the tourism sector. ii The lack of systematic evidence on the economic impact of tourism, hence, does not stem from theoretical or methodological issues, but is mainly triggered by: a. insufficient human and financial resources invested by NSOs in the collection and the processing of tourism data; b. lack of a legal framework and of specific technical guidelines at EU level as regards the timing and the approach to be followed in data collection, organization and harmonization; further investigations and analyses related to methodological and conceptual issues in line with TSA:RMF 2008 have to be carried out. c. lack of a unique standard procedure used by EU member countries to report and disseminate TSA information. iii Existing reports and available data identify a group of about 18-20 EU countries for which it is possible to avail of estimates of the direct economic impact of tourism on Domestic Output and / or Gross Value Added. For a subset of them, findings on employment are also available. iv There are only four countries (Austria, Estonia, Germany and Spain) that also publish reports or data on the indirect and total impact of tourism, to which the routine developed within this project allows to add four other countries (Czech Republic, Italy, Portugal, the United Kingdom). v Findings suggest a great degree of heterogeneity in the role played by tourism in the EU economies. Countries differ in: a. the relative importance of tourism to domestic output (from 1.5% of Poland to 7.3% of Cyprus, see Table 2); b. the relative importance of tourism value added to gross value added (from 2.1% of Romania to 7.1% of Spain, see Table 1); c. in the share of employment directly generated by tourism (from 3.6% of the UK to 7% of the Netherlands, see Table 3); d. in the relative weight of inbound expenditure as compared to domestic expenditure (from 14% of Germany to 90% of Malta, see Table 5); e. in the relative importance of the indirect impact of tourism to value added (from 1.8% of Austria to the 5.4% of Italy, see Table 18); f. in the total economic impact of tourism to value added (from 5.9% of the Czech Republic to the 11.4% of Spain, see Table 18); g. in the value of the tourism multiplier (from 0.58 of Estonia to 1.29 of Italy, see Table 19); h. in the estimation of the total employment effect, from as little as 5,000 jobs created per 1 Million additional tourists in the case of domestic tourism in the Czech Republic to the 26,000 jobs created per 1 Million additional inbound tourists in the case of inbound tourism in Portugal. vi Such findings highlight that the use of statistical techniques to estimate missing data (e.g. econometric modelling) is inefficient, because the diverse economic structures of EU countries are likely to generate partially inconsistent results, and that the way forward is towards the improvement in TSA production and availability for each of the 28 EU countries. vii It is also likely that a partial explanation of the heterogeneity in results stems from the relevance of global production chains and from foreign trade in tourism value added, as an exploratory research project carried out by OECD and WTO (WIOD – World Input-Output Database) suggests. If foreign trade in value added is considered, total value added generated by tourism increases of about 15-20%, with peaks of 30% as in the case of Ireland and other small and open economies. viii Future research and statistical effort have thereby to focus on: a. Defining a legal framework to produce and publish standardized Tourism Satellite Accounts in each EU member country; b. Establishing a clear and complete common template to be used in the preparation of the TSA, in order to facilitate computation of results and further extensions. In this sense, the procedure and the template proposed in this report merges TSA and Input-Output tables to compute, semi-automatically, indirect and total impacts of tourism; c. Extending such procedure and template to the FIGARO project (the European Inter-Country Input-Output database) in order to provide an estimation of Foreign Value Added for the 28 EU countries, on top of direct, indirect and domestic value added.