The default spending profiles apply best to applications involving a broad range of ..... For example, the Michigan job to sales ratio in the hotel sector for 1997 is ...
Michigan Tourism Spending and Economic Impact Model
Daniel J. Stynes October 1, 2000
The Michigan tourism spending and economic impact model (MITEIM) was developed for Travel Michigan and the tourism industry within the state to help estimate the economic impacts of tourism-related decisions. The model can be used to estimate total visitor spending in an area and the associated economic effects in terms of sales, income, jobs, and tax receipts. The model is implemented in an Excel workbook.
The basic equation for estimating economic impacts of tourism is:
Economic Impact = number of visits * average spending per visit * multiplier
At a minimum, users of the model must provide estimates of the number of visits for which spending and impacts are desired. A database of spending profiles for different types of tourists and recommended economic multipliers for different regions are provided with the spreadsheet to complete the analysis.
The model is, of course, more detailed and complex than this simple equation may indicate. To apply the model, visits are broken down between several distinct types of visitors (market segments) with different spending patterns. Spending is reported in up to 12 categories in order to capture differences in spending across these subgroups of tourists and also reveal which sectors of the economy are linked to tourism spending. The impact model employs sector-specific multipliers and economic ratios derived from input-output models fro Michigan and sub-regions. The ratios and multipliers capture the income and jobs resulting from tourist spending in a given sector and the associated secondary effects. Sets of multipliers are provided for the state and sub-regions so that impacts may be estimated for the state as a whole, metropolitan areas, CVB regions, or individual counties. The spreadsheet model may be used to estimate impacts of all tourism in an area, or to evaluate impacts of particular market segments or proposed marketing or development decisions.
A more accurate estimate of spending and impacts can be provided if visitors are divided into subgroups or market segments with distinct spending patterns. For example, day visitor spending is quite different from that of overnight visitors and spending also varies across groups of overnight visitors depending on lodging types. While the model can accommodate any segments for which spending data are available, we recommend five lodging-based segments as a starting point. Default spending profiles for these five segments are provided on the spreadsheet.
1. Day visitors Overnight visitors staying in … 2. Motels, B&B's and other commercial lodging 3. Campgrounds 4. Owned seasonal homes, 5. With friends and relatives.
Note that rented homes, condos ands B&B's are included with motels and the final segment includes visitors staying with friends and relatives. VFR here is a lodging type, not a trip purpose. To use the spending profiles for these (or any other segments), the number of visits must be broken down by segment.
Generic, Custom and Local Data
Estimates of the number and kinds of visitors for a given application must be provided by the model user. Several options are provided in the model for selecting spending averages and multipliers. The model is designed to be useful in situations with limited or more extensive information and for either "quick and dirty" or quite detailed kinds of analyses. "Generic" spending data sets (low, medium and high) built into the model are general averages that can be readily applied to particular regions or applications. A database of "custom" spending datasets has also been assembled from recent studies and this will be extended and updated as new studies are conducted. Users may also enter their own spending data based on local surveys or judgment. Any of the spending datasets may be easily adjusted on the spreadsheet to better reflect a particular region, group of visitors or intended application. Multipliers are also provided in both a "generic" form and "custom" multiplier datasets for particular sub- regions of the state down to a county level.
A database of spending profiles for a range of tourism market segments are provided for use with the MITEIM model. Model users may adjust or edit these spending profiles, as deemed necessary, to fit their own application. Users may also input their own spending data. The system is designed to easily add new spending data as it becomes available. Spending estimates from previous studies may also be updated using price indices that are built into the model. The general tourism spending profiles (defaults) included with the model were estimated based on the 1998 Michigan Welcome Center visitor survey and selected other recent studies. When applied to American Travel Survey statewide estimates of the number of trips to Michigan, the tourist spending averages yield total spending that is consistent with the state's lodging room use tax collections and selected other sources. Spending averages are generally presented on a party-night basis, as these generalize better across applications involving different lengths of stay and party sizes. The averages are also more readily evaluated against our own judgment in this form ( e.g., average spending on a motel room can be weighed against an average room rate when spending is presented on a party night basis). The default spending profiles apply best to applications involving a broad range of tourists. We are gathering additional spending data to profile more specialized markets such as resort golfers and downhill skiers.
Multipliers and Secondary Effects
The model converts tourist spending to the income generated and the number of jobs supported by using sets of economic ratios and multipliers for the state and sub-regions. The MITEIM model itemizes the direct effects within key tourism-related sectors of the economy by using sector-specific ratios of jobs and income to sales. Total effects are presented in aggregate form and include both indirect and induced effects. Three "generic" sets of multipliers may be chosen: (1) Rural - for local regions of 1-6 counties with overall populations less than 100,000 and fairly limited economic development, (2) Small metro - for regions that are larger in geographic extent and/or contain one or more smaller SMA's , and (3) State - for statewide analysis or regions containing the Detroit Metro area. Model users may import custom multipliers for many sub-regions of the state and others may be generated upon request. We can generate multipliers for use with MITEIM from the IMPLAN system for any region defined as one or more Michigan counties.
Economic ratios and multipliers for the state and sub-regions are derived from input-output models estimated with the IMPLAN Pro 2.0 using the 1996 and 1997 economic databases. For users with access to and knowledge of the IMPLAN Pro software, there are spreadsheet utilities for creating multiplier data files from an IMPLAN model for use with MITEIM.
Using the MITEIM model
The economic impact model provides users with considerable flexibility. Analysts with limited knowledge of regional economic methods and/or limited data can generate impact estimates quickly and easily using the defaults built into the spreadsheet. The only input that is absolutely required is the number of visits, hopefully broken down by lodging segments. The statewide spending profiles should apply reasonably well to any general tourism application, although they should be adjusted when analyzing narrowly defined and specialized markets. Use the "high" spending profiles for upscale markets and regions with higher prices and more spending opportunities. Use "low" spending profiles in rural areas with limited spending opportunities and applications involving "budget" travelers. Multipliers for a given area may be selected on the spreadsheet using either the generics or custom multiplier datasets.
For analysts with more skills or information, the model can be customized and extended to suit your particular interests. All of the data and calculation formulas can be inspected in the workbook. Segments can be changed to suit a particular application and local spending data can be entered. Users familiar with input-output techniques may also adjust multipliers or use the MITEIM model with an input-output modeling system like IMPLAN Pro.
The user interface includes a number of push-buttons to simplify routine procedures for those less familiar with Excel. These buttons run simple macros. Users proficient with Excel may use the Excel commands to paste data into a worksheet, copy information out of the workbook, or print selected ranges. Users may generate their own custom reports in the workbook.
A basic understanding of economic impact concepts and methods is helpful to properly interpret the results. Three bulletins explaining economic impact concepts and methods are available at our website along with reports and other material on estimating the economic impacts of tourism. At the website, you may also try a simple on-line version of the model or download the most recent MITEIM model. Go to the MITEIM section of our website http://www.msu.edu/course/prr/840/econimpact for further information or to download the latest version of the model.
For more information about the model contact:
Daniel J. Stynes Michigan State University 131 Natural Resource Building East Lansing, Michigan 48824-1222
E-mail : [email protected]
Phone: (517)-353-5190 -ext 109 FAX: (517)-432-3597 Home page: http://www.msu.edu/user/stynes - has link to economic impact site Economic Impact web site: http://www.msu.edu/course/prr/840/econimpact
The MITEIM.XLS WORKBOOK
The MITEIM model is set up as a multi-page Excel workbook. The workbook includes a number of macros to automate various steps. You must answer "Yes" to enable macros when you first open the file. The MITEIM workbook has eight displayed pages as follows:
WELCOME : the welcome page includes the basic steps for estimating economic impacts with the MITEIM model and contains links to our economic impact webpage and other useful sites. The basic steps are to A) choose or edit spending data, B) enter visits, and C) select multipliers and compute economic impacts. An optional tax calculation page is also included. SPEND: On the SPEND page you choose or edit a set of spending profiles from those provided or your own spending data. A spending profile gives the average amount spent (usually on a per party/per day basis) for a particular visitor segment. The spending data are organized in sets of up to 12 visitor segments that can be used in a given application. The default spending figures are the 1998 statewide lodging segment spending averages. There are buttons on the SPEND page to import other spending datasets (generic or custom datasets) and to price adjust spending to any year between 1990 and 1999. You may also edit the spending data directly on this page or create and save your own spending datasets. VISITS: On the VISITS page, you enter the number of visits, usually in party nights and the breakdown of these visits by segment. Visits may be entered as segment shares or absolute amounts. The segments for the analysis are implicitly chosen when you select a spending dataset. Segment names from the spending columns are transferred to the VISITS page. You needn't use all segments in the dataset. Enter 0 visits for segments not included in your application. Be sure to enter visits in the same units for which spending is reported. Note that all of the spending datasets provided with the MITEIM model are in party nights. We recommend using party day = party night as the unit for visits and spending. Visitation figures in other units may be converted to party nights using average party size and length of stay information. TOTSP : Total visitor spending is computed on the TOTSP page by multiplying the number of visits (in each segment) entered on the VISITS page by the spending averages on the SPEND page. Spending is summed across segments to estimate total spending. MULTIPLIERS: Economic impacts are calculated using a set of economic multipliers and ratios for the designated region. The defaults on this page are the Michigan statewide multipliers for 1997, estimated using IMPLAN Pro 2.0. Button are provided to import multipliers for other regions or years. If multipliers for your region are not available use those for a similar region or one of the "generics". Contact us for custom multipliers for a particular area. Impact calculations are carried out in Tables M1 and M2 below. See the summary page for a summary of results. TAXES: Taxes accruing to federal, state or local governments are computed based on the estimated sales and income effects. You must enter or edit local tax rates and have the option of including any combination of federal, state, or local taxes. Taxes are only computed for the direct effects. SUMMARY: Economic impact results are summarized in a single page report. Table 1 reports the direct effects in some detail. Table 2 summarizes direct and total effects including aggregate multipliers. Table 3 reports selected impact measures on a per dollar of visitor spending basis and Table 4 summarizes tax revenues. PRINT-CHARTS: Macros on this page allow you to create a variety of charts and graphs or to print tables from previous pages.
Move from page to page in the workbook by selecting page tabs at the bottom
Normal steps are: 1. Select or edit spending data on SPEND page 2. Enter visit data and segment shares on VISIT page 3. Check total spending estimates on TOTSP page 4. Choose multipliers on MULTILIERS page 5. Enter local tax rates on TAX page (optional) 6. Inspect results on SUMMARY page SPEND Page
SPEND: On the SPEND page you select spending profiles and at the same time a set of segments that will be used in the analysis.
Table 1 contains the default ("Medium") spending profiles. Spending is itemized in 12 standard categories. There are twelve columns for segments. The default segments are five lodging-based segments as defined above. The other seven columns are blank. The blank columns may be used to add your own segments. You may also import different spending datasets The first row of the table contains important identifying information: the unit of analysis in Column G, the name of the dataset in column I, and the year of the spending data in Column L.
The segment names in row three define the segments. These names appear again on the VISITS page where the number of visits for each segment must be entered.
The spending figures in each column are average spending figures on a party night basis for the given segment in 1998 dollars. Rounding to the nearest dollar, the default medium level per night spending for a Michigan tourist staying in a motel is $171 including $65 for the room, $38 in restaurants and $13 for gas and oil.
|Table 1. Spending by Segment in |Party-nig|General |1998 | |Michigan |ht |Tourism | | | | | |SEGMENT |Space for up to 12 | | | | | |segments | |CATEGORY | |SEGMENT |SHARE |Party-ni| | | |ghts | | | |(000's) | |Day |16.0% | | | | |14,400 | |Motel |21.0% | | | | |18,900 | |Camp |5.5% | | | | |4,950 | |Seasonal |17.5% | | |Home | |15,750 | |With F & R |40.0% | | | | |36,000 | | | | | |CHECK SUM |100.0% |90,000 |
Converting visitation data to party nights. If your visit data is in person days, party trips, or some other units, you may convert to party nights using party size and length of stay information. The conversion factors from the 1995 American Travel Survey are shown below.
|Table 3. Conversion Factors for Michigan Trips (from | | |1995 ATS Survey ) | | | |Lodging segments | | |ATS 1995 |Day |Motel |Camp |SH |VFR |Total | | |Trip | | | | | | | | | | | | | | |Conversion | | | All Trips to | | | |Factors | | |Michigan | | | |Party size |2.13 |2.18 |3.11 |2.53 |2.30 |2.29 | |Nights at |1.00 |2.88 |3.65 |3.57 |3.61 |2.78 | |destination | | | | | | |
The multiplier page computes the direct and total economic impact of the visitor spending. Direct and total effects are computed using a set of economic ratios and multipliers for the given study area. The default analysis is for a statewide impact, using the 1997 Michigan statewide economic ratios and multipliers. Choose the rural, small metro or IMPORT Custom Multipliers button to replace the Michigan Statewide multipliers with another set of multipliers. Users may choose multipliers for different regions. Multiplier files have a fixed format and a "*.m12.xls" file extension.
|Table 4. Default Statewide Michigan Multipliers by Sector , 1997a | | |Direct effects |Total effects multipliers | |Sector | | |Direct effect Multipliers |Total effect multipliers | | |Region | |Table 6. Economic Impacts of Visitor Spending : Direct | | |Effects | | | | Direct Effects | | | |Sector/Spending category|Direct |Jobs |Personal |Value | | |Sales |Thousands|Income |Added | | |$Millions| |$Millions |$Millions | |Motel, hotel cabin or |1,138 |27 |419 |642 | |B&B | | | | | |Camping fees |54 |1 |20 |31 | |Restaurants & bars |1,566 |48 |531 |754 | |Groceries, take-out |756 |4 |118 |210 | |food/drinks | | | | | |Gas & oil |144 |0 |7 |21 | |Other vehicle expenses |111 |1 |34 |58 | |Local transportation |219 |5 |124 |144 | |Admissions & fees |456 |14 |165 |276 | |Clothing |10 |0 |3 |4 | |Sporting goods |12 |0 |3 |6 | |Gambling |182 |6 |66 |110 | |Souvenirs and other |27 |0 |7 |11 | |expenses | | | | | |Retail Trade |1,278 |35 |620 |998 | |Wholesale Trade |273 |2 |111 |191 | |Total |6,226 |143 |2,228 |3,455 |
|Table 7. Direct and Total Economic Impacts of Visitor | | |Spending | | | Economic measure |DIRECT |Multiplie|TOTAL | | |EFFECTS |r |EFFECTS | |Output/Sales ($ |$ 6,226 | |$ 9,959 | |Millions) | |1.60 | | | Personal Income ($ |$ 2,228 | |$ 3,594 | |Millions) | |1.61 | | |Value Added ($ Millions)|$ 3,455 | |$ 5,699 | | | |1.65 | | |Jobs (000's) |143 | |192 | | | |1.34 | | | | | | | |Total Visitor Spending | |$ 8,010 | | |($ Millions) | | | | |Capture rate | |78% | | |Effective spending | | | | |multiplier | |1.24 | |
|Table 3. Marginal Impacts per dollar of spending and| |per 1,000 party nights | | Impact measure | |Change per |Change per | | | |$1,000 of |1,000 party | | | |Visitor |nights | | | |spending | | |Direct personal income | |$ 278 |$ 24,760 | |Direct value added | |$ 431 |$ 38,387 | |Direct jobs | |0.018 |1.593 | |Total personal income | |$ 449 |$ 39,935 | |Total value added | |$ 711 |$ 63,322 | |Total jobs | |0.024 |2.130 |
|Table 4. Tax Impacts of Direct Sales and | |Income ($ Millions) | | |Sales | Income |Total | |Federal | | | | | |88 |325 |413 | |State | | | | | |438 |76 |514 | |Local | | | | | |54 |- |54 | |Total | | | | | |580 |401 |981 |
PRINT CHARTS - Page
Buttons here for creating and printing various charts and graphs from the above tables. Glossary of Economic Impact Terms
Terms are presented in groups within a logical rather than alphabetical order
Region – defines the geographic area for which impacts are estimated. The region is generally an aggregation of one or more counties.
Sector is a grouping of industries that produce similar products or services. Most economic reporting and models in the U.S. are based on the Standard Industrial Classification system (SIC code ). Tourism is more an activity or type of customer than an industrial sector. While hotels (SIC 70) are a relatively pure tourism sector, restaurants, retail establishments and amusements sell to both tourists and local customers. There is therefore no simple way to identify tourism sales in the existing economic reporting systems, which is why visitor surveys are required to estimate tourist spending.
Impact analysis estimates the impact of dollars from outside the region (“new dollars”) on the region’s economy. Significance analysis estimates the importance or significance of an industry or activity to a region usually including spending by both local residents and visitors from outside the region.
Input-output model. An input-output model is a representation of the flows of economic activity between sectors within a region. The model captures what each business or sector must purchase from every other sector in order to produce a dollar’s worth of goods or services. Using such a model, flows of economic activity associated with any change in spending may be traced either forwards (spending generating income which induces further spending) or backwards (visitor purchases of meals leads restaurants to purchase additional inputs -- groceries, utilities, etc.). Multipliers may be derived from an input-output models.
IMPLAN is a micro-computer-based input output modeling system. With IMPLAN, one can estimate 528 sector I-O models for any region consisting of one or more counties. IMPLAN includes procedures for generating multipliers and estimating impacts by applying final demand changes to the model.
Final Demand is the term for sales to final consumers (households or government). Sales between industries are termed intermediate sales. Economic impact analysis generally estimates the regional economic impacts of final demand changes. Tourist spending is one type of final demand.
Direct effects are the changes in economic activity during the first round of spending. For tourism this involves the impacts on the tourism industries (businesses selling directly to tourists) themselves.
Secondary effects are the changes in economic activity from subsequent rounds of re-spending of tourism dollars. There are two types of secondary effects:
Indirect effects are the changes in sales, income or employment within the region in backward-linked industries supplying goods and services to tourism businesses. The increased sales in linen supply firms resulting from more motel sales is an indirect effect of visitor spending.
Induced effects are the increased sales within the region from household spending of the income earned in tourism and supporting industries. Employees in tourism and supporting industries spend the income they earn from tourism on housing, utilities, groceries, and other consumer goods and services. This generates sales, income and employment throughout the region’s economy.
Total effects are the sum of direct, indirect and induced effects.
Multipliers capture the size of the secondary effects in a given region, generally as a ratio of the total change in economic activity in the region relative to the direct change. Multipliers may be expressed as ratios of sales, income or employment, or as ratios of total income or employment changes relative to direct sales. Multipliers express the degree of interdependency between sectors in a region’s economy and therefore vary considerably across regions and sectors.
Type I multipliers do not include induced effects while Type II multipliers do. Type SAM multipliers adjust the Type II multipliers for income that is not normally respent immediately within the region, e.g. commuting workers who live outside the region and retirement benefits.
A sector-specific multiplier gives total changes throughout the economy associated with a unit change in sales in a given sector.
Aggregate tourism multipliers are based on some assumed initial changes in final demand. An aggregate tourism spending multiplier is based on an assumed distribution of tourist spending across economic sectors. These are basically weighted averages of sector specific multipliers with the percentage of spending in each sector as the weights.
Capture rate is the percentage of spending that accrues to the region’s economy as direct sales or final demand. All tourist spending on services within the region is captured, however, tourist purchases of goods is generally not all treated as final demand to the region. For imported goods bought at retail establishments, only the retail and possibly wholesale margins will accrue to the local economy.
Purchaser prices are the prices paid by the final consumer of a good or service. Producer prices are the prices of goods at the factory or production point. For manufactured goods the purchaser price = producer price + retail margin + wholesale margin + transportation margin. For services, the producer and purchaser prices are equivalent. The retail, wholesale and transportation margins are the portions of the purchaser price accruing to the retailer, wholesaler, and shipper, respectively. Only the retail margins of many goods purchased by tourists accrue to the local region, as the wholesaler, shipper, and manufacturer often lie outside the local area.
Measures of economic activity:
Sales or output is the dollar volume of a good or service produced or sold Final Demand = sales to final consumers Intermediate sales = sales to other industrial sectors
Income is the money earned within the region from production and sales. Total income includes Wage and salary income, and Proprietor’s income, rents and profits
Jobs or employment is a measure of the number of jobs required to produce a given volume of sales/production. Jobs are usually not expressed as full time equivalents, but include part time and seasonal positions.
Value Added is the sum of total income and indirect business taxes. Value added is the most commonly used measure of the contribution of a region to the national economy, as it avoids double counting of intermediate sales and captures only the “value added” by the region to final products.