The tourism around the globe

There is no denying the fact that the Pilot Tourism Satellite Account (TSA) for Bangladesh in the form of various tables suggested by the World Tourism Organization (WTO) is presented in this report. Dis aggregated figures of various components of tourism as well as method of arriving at estimates of tourism sector’s role in the economy are accessible. Following standard TSA methodology, we have estimated that for Bangladesh Economy tourism value added to be1.26 percent of GDP in terms of direct impact, and1.33 percent of GDP when indirect effects are also included. Tourism’s share in total number of jobs is 4.13 percent, rising to 4.39 percent when indirect effects are also included.

Since the TSA framework is new and not much familiar, we provide a brief introduction to the concepts and issues. Next, the methodology and the basic findings of the TSA for are presented in the report.

In this chapter we provide a snapshot idea about tourism and its contributions to economic upliftment in an economy in an economy.

1.1 About Tourism

Tourism Industry is flourishing very rapidly and posthumously all over the world. The scenario of the world tourism industry is always in a state of flux, ever changing. It is reckoned that end of 21st century will see the world tourism industry generating nearly 500 million job opportunities for the people. It is also assumed that the contribution towards the GDP by the World tourism industry will be approximately above 15%. However, in order to meet the requirements, constant changes in the travel and tourism policies need to be reframed and restructured. Tourism is a vital source of income for many countries and it generates income through the consumption of goods and services by tourists, the taxes levied on business in the tourism industry, and the opportunity for employment in the service industries associated with tourism. Some of the services offered by these industries include transportation services such as cruise ships and taxis, accommodation services such as hotels, restaurants, bars and entertainment venues and other hospitalities.

Global Tourism Industry

                                                                          

International tourism is now predicted to increase in the 3-5 % range next year, according to IPK’s World Travel Monitor and UNWTO forecasts. IPK’s Global Travel Confidence Indicator lies at 103 points for 2011, including 3% to 5% growth in world outbound travel. The main drivers will be the improving world economy and low fares from budget airlines while safety and environment concerns are not expected to impact significantly. Similarly, the UNWTO now forecasts growth of 4-5% in international arrivals for 2011, which would put the sector back at the long-term growth rate of 4% recorded between 2000 and 2009. Air passenger volumes, according to Boeing, are likely to rise about 5% in 2011.

Key figures on global overnight travel (2010 changes compared to 2009 changes):

All domestic and outbound trips: 9.8 billion (+5% vs. -1% - new all-time high)

-              Outbound trips: 0.935 billion (+7% vs. -4% - new all-time high)

-              Outbound nights: 5 billion (+5% vs. -7% - new all-time high expected for 2011)

-              Outbound spending: € 781 billion (+7% vs. -9% - new all-time high expected for 2011)

Travel and tourism is the lifeblood of many countries. Clear understanding about tourism, its role in the economy and steps needed to be taken for promotion of tourism are very important.

Tourism is a social, cultural and economic phenomenon related to the movement of people to places outside their usual place of residence pleasure being the usual motivation.

The activities carried out by a visitor may or may not involve a market transaction, and may be different from or similar to those normally carried out in his/her regular routine of life. If they are similar, their frequency or intensity is different when traveling. These activities represent the actions and behaviors of people in preparation for and during a trip in their capacity as consumers.

Tourism has an impact for the economy, for the natural and built environment, for the local population at the places visited, and for the visitors themselves.

Due to this range of impacts, and the wide spectrum of stakeholders involved, there is a need for a holistic approach to tourism development, management and monitoring. This approach is supported by UNWTO in order to formulate and implement national and local tourism policies.

Having more and reliable statistics is essential for policymakers to make effective decisions. Only with sufficient and adequate data that generate credible statistics is it possible to undertake different types of analysis of tourism. This is essential in order to evaluate the different aspects of tourism and to support and improve policy and decision making.

Tourism statistics are necessary for designing marketing strategies, strengthening interinstitutional relations, evaluating the efficiency and effectiveness of management decisions, and measuring tourism throughout the national economy.

Travel & Tourism is an important economic activity in most countries around the world. As well as its direct economic impact, the industry has significant indirect and induced impacts. The UN Statistics Division-approved Tourism Satellite Accounting methodology (TSA: RMF 2008) quantifies only the direct contribution of Travel & Tourism. But WTTC recognizes that Travel & Tourism's total contribution is much greater, and aims to capture its indirect and induced impacts through its annual research.

                                                                                 

1.2      Understanding Contribution of Tourism

Tourism remains the fastest growing service industry in the economies of most of developing countries; hence more research has gone into the operations of the sector in order to examine its economic significance and potential. (Armstrong, 1974) It is known that the industry provides an important impetus to growth in other sectors such as agriculture, transportation, retailing and manufacturing and is therefore seen as a key component of economic development. It plays a major role for the generation of foreign exchange which directly facilities the improvement of foreign reserves of said economics. Similarly, the sector has shown greater improvements in employment generation (direct and indirect), revenue accruing to tourist sites, and increase in number of hotels and similar establishments and other tourism supply establishments.

Tourism is a fast growing economic activity in many countries around the word, and plays an important role in the economic and technological development of nations. As Edge points out, tourism serves to stimulate the development of basic infrastructure, contributes to the growth of domestic industries, attracts foreign investment, and facilitates the transfer of technology and information.

Direct Contribution

The direct contribution of Travel & Tourism to GDP refers to the ‘internal’ spending on Travel & Tourism (total spending within a particular country on Travel & Tourism by residents and non-residents for business and leisure purposes) as well as government 'individual' spending - spending by government on Travel & Tourism services directly linked to visitors, such as cultural (e.g. museums) or recreational (e.g. national parks).

The direct contribution of Travel & Tourism to GDP is calculated to be consistent with the output, as expressed in National Accounting, of tourism-characteristic sectors such as hotels, airlines, airports, travel agents and leisure and recreation services that deal directly with tourists. The direct contribution of Travel & Tourism to GDP is calculated from total internal spending by ‘netting out’ the purchases made by the different tourism sectors. This measure is consistent with the definition of Tourism GDP, specified in the 2008. Tourism Satellite Account: Recommended Methodological Framework (TSA: RMF 2008).

Total Contribution

The total contribution of Travel & Tourism includes its ‘wider impacts’ (i.e. the indirect and induced impacts) on the economy. The ‘indirect’ contribution includes the GDP and jobs supported by: Government 'collective' spending, which helps Travel & Tourism activity in many different ways as it is made on behalf of the ‘community at large’ – e.g. tourism marketing and promotion, aviation, administration, security services, resort area security services, resort area sanitation services, etc; Domestic purchases of goods and services by the sectors dealing directly with tourists - including, for example, purchases of food and cleaning services by hotels, of fuel and catering services by airlines, and IT services by travel agents.

Travel & Tourism investment spending – an important aspect of both current and future activity that includes investment activity such as the purchase of new aircraft and construction of new hotels; The ‘induced’ contribution measures the GDP and jobs supported by the spending of those who are directly or indirectly employed by the Travel & Tourism industry.

Tourism is one of the major foreign exchange earners and main growth sector for many countries especially the small islands which are with required natural and cultural resources. The world tourism market has grown at an average of 3.7 percent over the past five years and is projected to grow by an average of 4.9 percent over the next five years, with Asia and the Pacific regions recording the fastest growth rate. According to WTTC (World Travel and Tourism Council 2010) Travel & tourism actively was hit hard by the global slump, Even so, the sector worldwide still provided over 235 million jobs last year.

Tourism expenditures generate income to the host economy and can stimulate the investment necessary to finance growth in other economic sectors. Some countries seek to accelerate this growth by requiring visitors to bring in certain a certain amount of foreign currency for each day of their stay. An important indicator of the role of international tourism is its generation of foreign exchange earnings. Tourism is one of the top five export categories for as many as 83% of countries and is a main source of foreign exchange earnings for at least 38% of countries.

Australian scenarios

Australia’s tourism industry performed well during 2011–12 with an 8.0 per cent growth in total visitor expenditure over the previous year. Most of this growth was in the domestic market which demonstrated a substantial increase from its lows of recent years.

In relation to inbound tourism, strong performance from Asia, in particular China, more than offset falls from some of Australia’s more traditional markets in Europe that led to a small overall increase in inbound tourism during 2011–12 over the previous year.

This year’s State of the Industry Report shows that overall; the industry’s performance was much improved over the previous year on most indicators. This was achieved despite the continuing high value of the Australian dollar and a range of challenges in the macroeconomic environment.

Macroeconomic challenges

Four years on from the onset of the Global Financial Crisis (GFC), the global economy is still reeling and recovery in the world’s largest economy, the United States, remains muted. The ongoing sovereign risk crisis and return to recessionary conditions in key Australia, the relatively solid performance of the Australian economy underpinned by the mining boom is a positive force for tourism. However, this is offset by the fact that the Australian dollar remains at or near record cross-rates with most of Australia’s main tourism partners including the United States (US dollar) and Europe (Euro).

International tourism                                             

Australia’s international visitor arrivals in 2011–12 increased by 1.2 per cent (to a record 6.0 million; Figure ES2) and revenues in this sector increased by 1.5 per cent to $26.6 billion.

There was substantial growth in the China market, both in terms of arrivals (up 16.7 per cent) and expenditure (up 9.1 per cent to $3.8 billion). There was also solid growth in expenditure from the United States and New Zealand (up 7.5 and 3.8 per cent respectively). However, this growth was largely offset by declines from Australia’s more traditional markets, particularly from the United Kingdom (down 6.6 per cent).

§  Travel & Tourism activity was hit hard by the global slump, with Travel & Tourism economy GDP contracting by 4.8% in 2009. Even so, the sector worldwide still provided over 235 million jobs last year.

§  Travel & Tourism’s recovery - like that of the world economy - is expected to be a gradual one. After growth of just 0.5% in 2010, Travel & Tourism economy GDP is likely to grow by 3.2% in 2011, with momentum building from the second half of 2010 and into next year.

1.3       Objectives of the Assignment

The overall objective of the study is to capture reliable data from secondary sources and through conducting sample surveys as a part of developing a pilot tourism satellite accounts for Bangladesh. The reference period is the financial year 2011-12. The specific and detailed objectives of the study include the followings:

v  To provide a coherent and credible set of tourism accounts that can be compared across countries

v  To develop quantitative estimates of tourism value added, thus analyze the importance of tourism in economy

v  To provide detailed information on employment in tourism industries and the role of tourism played in job creation for different type of workers

To estimate other variables necessary for the set of account

Definitions and Conceptual Framework

2.1 Basic Ideas behind Tourism

We present herein a lucid account of various definitions and concepts associated with Tourism world.

Terms and Terminology

• Travel and Tourism

Travel is an activity done by a person moving from one geographic location to another. The person doing such an activity is a Traveler.

A Trip is a to-and-fro activity. It is the travel by a person from the time of departure till he comes back to the origin. It is thus a Round Trip.

Domestic Travel is done by a resident within the country of residence.  Travel to a country by non-resident is called Inbound Travel. Travel done by a person outside his country of residence is called Outbound Travel. Thus, a person doing above types pf traveling is called a Domestic, Inbound and Outbound Traveler.

Thus, an Inbound Trip refers to travel between arriving in a country and leaving it. But, Domestic and Outbound trip refer to leaving place of residence and returning. Domestic travel has ultimate destination within own country of residence but outbound has destination outside country of reference.

International and domestics visitors

International travel consists of both inbound and outbound travel. Country of residences of the traveler is different from the countries visited. From perspective of country of reference an international traveler is either inbound or outbound.

With respect to the country of reference an international traveler qualifies as an international visitor if he is on tourism trip (less than one year, purpose are business, personal, leisure etc and not employment) and if he is a non-resident traveling in the country of reference or a resident traveling outside of it.

A Visitor takes a trip outside his usual environment for less than one year for purposes other than employment in the places visited .These, trips taken by visitors called Tourism Trips.

So, a domestic, inbound and outbound traveler on a tourism trip is called domestic, inbound and outbound visitors.

Thus, according to the above, a travel becomes Domestic, Inbound or Outbound Tourist.

Hence, tourism is a subset of travel and visitors form a subset of travelers. A visitor becomes a Tourist if his stay is overnight .Thus, we can classify as,

Domestic visitor becomes Domestics Tourist

Inbound visitors become Inbound Tourist.

Outbound visitors become Outbound Tourist.

This classification depends on purpose of visit and staying duration.

So, a Tourist is An Overnight Visitor or a Same Day Visitor.

• Economic Territory

It is the geographical area for which measurement is done (country of reference).

• Economy

It refers to economic reference as used in balance of payment and national accounts. It also refers to agents who are residents of the country of reference.

• Usual environment

This is the geographical area within which an individual leads his regular life routines.

• Tourism trips and visits

Trips taken by visitors are tourism trips.

An inbound tourism trip refers to travel of visitor from time of arriving in a country to the time of leaving.

Main destination of a tourism trip is the place key to the whole trip.

In domestic trip main destination is the country of residence of the visitor. Both inbound and outbound trip have main destination outside the country of residence of the visitors.

An outbound tourism trip might include visits to places within the country of residence. A domestic trip might include visits of place outside the country of residence of the visitor. Here main destination is country of residence.

Forms of tourism

(a)Domestic Tourism comprises the activities of a resident visitor within the country of reference either as part of a domestic tourism trip or part of an outbound tourism trip.

(b)Inbound Tourism comprises the activities of a non-resident visitor within the country of reference on an inbound tourism trips.

(c)Outbound Tourism, comprises the activities of a resident visitor outside the country of reference, either as part of an outbound tourism trip or as part of a domestic tourism trip.

(d)Internal Tourism comprises domestic tourism and inbound tourism, that is, the activities of resident and non-resident visitors within the country of reference as part of domestic or international tourism trips.

(e)National Tourism comprises domestic tourism and outbound tourism, that is, the activities of resident visitors within and outside the country of reference, either as part of domestic or outbound tourism trips.

(f)International Tourism comprises inbound tourism and outbound tourism, that is, the activities of resident visitors outside the country of reference, either as part of domestic or outbound tourism trips and the activities of non-resident visitors within the country of reference on inbound tourism trips.

(g)Tourism Internal comprises of Inbound, Domestic and domestic part of outbound tourism.

Demand perspective:

It deals with “what is wanted by tourist”.

Tourism expenditure

To measure contribution of tourism to economy requires the use of monetary values.

Bangladesh Domestic Tourism Expenditure.

• Made purely by residents of Bangladesh within Bangladesh.

Inbound Tourism Expenditures

• Non-residents (from abroad) expenses made in Bangladesh.
• Bangladeshi nationals residing abroad expenses within Bangladesh

Outbound Tourism Expenditure

• Bangladeshi nationals going abroad and their expenses made abroad.

Internal Tourism Expenditure

• Bangladesh residents and non-residents make expenses within Bangladesh. Such non-residents can be both Bangladeshi national and foreign nationals.

National Tourism Expenditure

• Bangladeshi travelers make expenses within Bangladesh and outside Bangladesh.

Tourism balance of trade

Tourism imports comprise of goods and services purchased by residents on a trip outside the country whilst tourism exports comprise goods and services purchased by non-residents visitors in the country. The tourism balance of trade is defined as tourism exports net of tourism imports.

Supply perspectives of Tourism

Economic contribution of tourism can be traced and measured by responses to demand of goods and services of visitors. Thus, supply is providing goods and services to visitor’s .These goods and services make up tourism expenditure.

Thus, supply analysis needs to,

1. Show the conditions that enable producers provide goods and services to visitors.

2. Describe the processes, production costs and economic performances of suppliers in tourism industries.

Gross output

Gross output for the tourism sector includes the value of goods and services produced by tourism industries (tourism output) and imported items purchased by tourists.

Intermediate consumption

Intermediate consumption of industries covers non-durable goods and services used up in the production process. For this TSA, intermediate consumption of industries (providing the product) will be calculated as a percentage of gross output assuming the same ratios of the SUT.

Tourism Direct Gross Value Added (TDGVA)

Tourism Direct Gross Value Added is calculated as the difference between the gross output and intermediate consumption. It adds the parts of gross value added generated by tourism industries and other industries of the economy that serve directly visitors.

Valuation

Gross output is valued at basic prices, that is, the amount receivable by the producer exclusive of taxes payable and inclusive of subsidies receivable on the products. Intermediate consumption is at purchaser’s price, that is, it includes trade margins of wholesalers and retailers as well as additional transport charges payable by the purchaser and non-deductible VAT.

2.2      What is TSA?

The Tourism Satellite Accounts (TSA) is an accounting framework adopted by the structure and role of tourism in an economy. The need for a satellite account arises because it is not an industry in the way industry is defined in the system of national accounts. Instead, tourism is a demand based concept defined not by its output but by its use. Tourism differs from many economic activities in that it makes use of a diverse range of facilities across a large number of industrial sectors. As a result, it is not possible to identify tourism as a single industry in the national accounts, so that its value to the economy is not revealed. Industries defined in national accounts, such as air transport, hotels and restaurants, etc produce the same output irrespective of whether it is consumed by tourists or non tourists. While the total output of these industries is usually captured by the national accounts, it is only the consumption by tourists that defines the tourism economy, e.g. the part of total value added attributed to tourism activities. Insofar as tourism is an economic phenomenon, it is already embodied in the national accounts but not in a manner readily apparent because commodities and services that are produced and consumed in meeting tourism demand are buried in some other elements of the core accounts.

Objective of TSA

               

                Followings are the specific general objectives of constructing a TSA.

-          It provides credible data on the impact of tourism and the associated employment.

-          It is a standard framework for organizing statistical data on tourism?

-          It is a new international standard endorsed by the UN statistical commission?

-          It is a powerful instrument for designing economic policies related to tourism development?

-          It provides data on tourism’s impact on a nation’s balance of payments.

-          It provides information on tourism human resources characteristics.

Who can benefit from it and how?

                Total economy can benefit from TSA.

The TSA provides decision-makers with a tool for:

·         Policy making

·         Reliable data on the impact of tourism on the economy and on employment

·         Measuring domestic and no-resident tourism and the associated employment

·         Comparisons with other economic sectors

·         And in the future, international comparisons.

2.3      System of National Accounts (SNA) & SUT

A TSA analyses in detail all the aspect of demand of goods and services associated with tourism activities and how this demand is met by other economic activities.

A TSA provides:

(1) Macroeconomic aggregates that describe the size and the economic contribution of different forms of tourism.

(2) Data on tourism consumption, and how the demand is met by domestics supply and imports. Detailed production accounts of the tourism industries including linkages with other productive economic activities.

(3) It is linked to system of national account (SNA). SNA is used worldwide and allows international compatibility among statistical systems. UN statistical commission has developed a set of methodological document for use worldwide.

TSA is an extension of SNA to organize information on tourist demand and supply. TSA is composed of 10 tables as recommended by UNWTO.

What is SNA?

Comprehensive framework for production, investment, income, stocks and flows of financial & non-financial assets. It divides the economy into 5 institutional units (HH, Got, financial & non-financial corporate bodies, NPISH).

SNA has 3 accounts

-          Current accounts

-          Accumulation accounts

-          Balance sheets

Current account includes production, income distribution and use of income. It emphasizes production account which emphasizes VA as a balancing factor. Only output & Intermediate consumption are important here.

Distribution of income concerns distribution of VA (labor, capital, taxes). Use of income shows final consumption (Got, HH and NPISH).
SNA provides a very useful indicator & that is,
GDP= All VAs + All final goods & services+ All Primary incomes generated.

 Rossouw, R. and M. Saayman (2011), “Assimilation of tourism satellite accounts and applied general equilibrium models to inform tourism policy analysis,” Tourism Economics, v. 17, n. 4, pp. 753-783.

Round, J. (2003), “Social accounting matrices and SAM-based multiplier analysis” in F. Bourguignon and L. Pereira da Silva, editors, The Impact of Economic Policies on Poverty and Income Distribution: Evaluation Techniques and Tools, Oxford University Press, Oxford, UK.