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1 This article was downloaded by: [University of Eastern Finland] On: 22 February 2011 Access details: Access Details: [subscription number ] Publisher Routledge Informa Ltd Registered in England and Wales Registered Number: Registered office: Mortimer House, Mortimer Street, London W1T 3JH, UK Scandinavian Journal of Hospitality and Tourism Publication details, including instructions for authors and subscription information: The Regional Economics of Tourism in Northern Finland: The Socioeconomic Implications of Recent Tourism Development and Future Possibilities for Regional Development Jarkko Saarinen a a Finnish Forest Research Institute and University of Lapland, Rovaniemi, Finland Online publication date: 26 May 2010 To cite this Article Saarinen, Jarkko(2003) 'The Regional Economics of Tourism in Northern Finland: The Socio-economic Implications of Recent Tourism Development and Future Possibilities for Regional Development', Scandinavian Journal of Hospitality and Tourism, 3: 2, To link to this Article: DOI: / URL: PLEASE SCROLL DOWN FOR ARTICLE Full terms and conditions of use: This article may be used for research, teaching and private study purposes. Any substantial or systematic reproduction, re-distribution, re-selling, loan or sub-licensing, systematic supply or distribution in any form to anyone is expressly forbidden. The publisher does not give any warranty express or implied or make any representation that the contents will be complete or accurate or up to date. The accuracy of any instructions, formulae and drug doses should be independently verified with primary sources. The publisher shall not be liable for any loss, actions, claims, proceedings, demand or costs or damages whatsoever or howsoever caused arising directly or indirectly in connection with or arising out of the use of this material.

2 DOI: / ORIGINAL ARTICLE The Regional Economics of Tourism in Northern Finland: The Socio-economic Implications of Recent Tourism Development and Future Possibilities for Regional Development Jarkko Saarinen Finnish Forest Research Institute and University of Lapland, Rovaniemi, Finland... Abstract In Finland and other Nordic countries the economic and political significance of tourism for regional development has increased considerably in recent years, to the extent that in some regions it has become a crucial economic policy factor. Tourism is commonly looked on as having a favourable economic and social impact, introducing new, external sources of monetary income and opportunities to work in the regional economy and its operational cycle. Large amounts of public money are being spent nowadays on the development of tourism in the various regions of Finland. This paper discusses the role of tourism in regional economic and social development and provides an overview of the recent tourism development in northern Finland and its socio-economic implications. Examples of the economic and employment impact of tourism at the regional level are taken from an evaluation of the economic role of tourism in selected municipalities in northern Finland, by utilizing the so-called Nordic model for evaluating the regional and local tourism economy. Keywords: locality, regional economy, seasonality, social capital, tourism development Introduction: global change local realities in tourism development Tourism and the increasing number and new segments of tourists have become characteristic features of contemporary societies, global markets and... For correspondence: Professor Jarkko Saarinen, Professor of Geography, Tourism Studies, Department of Geography, PO Box 3000, FIN University of Oulu, Finalnd, jarkko.saarinen@oulu.fi Scandinavian Journal of Hospitality and Tourism, Vol. 3, No. 2, Taylor & Francis

3 92 Jarkko Saarinen everyday life in major tourism regions. The development has been fast: receipts from international tourism rose from 2.4 billion in 1950 to 506 billion in During the same period international tourism grew from 25.3 million to 625 million tourist arrivals. In 1999, tourism provided almost 200 million jobs and about 4.0 trillion of GDP across the world economy (World Tourism Organization, 2000; Milne & Ateljevic, 2001, p. 371). At the present time tourism is widely called the world s largest and fastest growing industry, and there is no indication that its growth is likely to end. In Finland, too, especially in Northern Finland, the tourism industry is an important, growing and crucial element in the regional economies and in everyday life. Tourism and tourists provide more employment opportunities in Finnish Lapland, for example, than any other field of the economy that makes direct or indirect use of natural resources. In 2000 the estimated employment in tourism was over 4000 full-time jobs in Lapland (see Saarinen, 2001). The growing economic role of tourism has also made it a social and political issue, and tourism has been increasingly used as a medium for many socio-cultural and economic goals on the regional and local level. Tourism has become an important policy tool dedicated to the change, development and reconstruction of the social and physical environment (Hartmann, 1986; Hughes, 1995). The recent growth of tourism in Western societies has been generally based on increasing free time, liberation and (almost) free movement of capital and the labour force and the successful diffusion of neo-liberal politics (see Massey, 1994, pp ; Cox 1997; Bell & Ward, 2000). These, along with diminishing transport costs, increased movement of products, people and information and the general restructuring of spatial relations, have led to increasing spatial differentiation (see Harvey, 1989, 1990; Allen et al., 1998), all of which has been mirrored in changes in tourism and its regional impacts. Change is a constant feature in tourism, but the destinations of tourism and the nature of their spatial reality including our sense of place are now being transformed much more rapidly and on a more non-local basis than before (see Timothy, 2002). As a result, this increasing spatial differentiation has also caused social and economic insecurity, with growing competition for production and consumers between, and within, tourist destinations (Montanari & Williams, 1995; Lafferty & van Fossen, 2001; see also Harvey, 1993, pp. 7 9; Kelly, 1999). One aspect of this insecurity and differentiation is the seasonality of tourism and its local and regional consequences in employment, income and services (Hartmann, 1986; Fredrick, 1993; Butler, 1994). In spite of the fact that tourism is an international and global activity and a process that has a wide variety of effects on different locations and spatial scales, tourism and its impacts are clearly not evenly distributed (Hall & Page, 1999, p. 1; Milne & Ateljevic, 2001). Tourism is a highly polarized activity whose regional impacts are not easily evaluated without a place and spacespecific research framework and understanding of the context and spatial

4 The Regional Economics of Tourism in Northern Finland 93 scales. In addition to the evaluation of regional impacts, this nature of tourism also creates the need to consider the role of localities, regions and communities in tourism development and how the places and spaces of tourism could be integrated more closely with regional development in order to reduce the potential process of regionally uneven social development. In recent discussions on tourism research and its contributions to wellbeing and the quality of life in destination regions, one perspective on the development of the benefits of tourism on a regional scale has been the notion of social capital in destination communities and the need to increase its use in tourism production and the creation of new or the maintenance of existing social capital for destination regions through tourism development (see Cooper, 2002). According to Putnam (1995) social capital has a collective character referring to the features of social systems, such as networks, norms and trust that facilitate both actions and co-operation to give mutual benefits. The implications of this in tourism development and its relation to localities in Northern Finland will be discussed in the conclusions of the paper after the evaluation of recent tourism development and its socio-economic effects in the region. The regional economy of tourism in Northern Finland is approached here using municipality level data. Thus, the paper is not concerned with the economic importance of tourism at the national scale or methods aiming to evaluate the national level impacts, which can be assessed in terms of such measures as the satellite account of tourism. The main purpose of this paper is to discuss the economic nature and impacts of tourism from the regional and local perspectives and introduce the recent development and current changes of tourism in Northern Finland. The economic significance of tourism is approached by utilizing the so-called Nordic Model with examples from the municipalities of Northern Finland. The examples focus mainly on the direct income and employment effects because the indirect and induced (multiplier) effects are not estimated in all the discussed municipalities. Special attention will be given to the regional structure of tourism, seasonality and local and non-local employment effects of tourism. Finally, the role of tourism within regional development is discussed with an emphasis on the stronger integration between the tourism industry and other local livelihoods, which has been noted as a crucial issue in the context of sustainable and locally beneficial tourism development (see Inskeep, 1994, p. 6, 31; Hall & Page, 1999, p. 253; Walpole & Goodwin, 2000). Also some of the problems in the evaluation of the regional economy of tourism and the usage of the Nordic model will be briefly discussed. Regional and local economies of tourism Large amounts of public money are being spent nowadays on the development of tourism in the various regions of the European Union. Especially

5 94 Jarkko Saarinen in peripheral and rural areas tourism has been used as a tool for economic growth, welfare and promoting jobs (see Fleischer & Felsenstein, 2000). In Finland, considerable proportions of public funds have been channelled to the eastern and northern parts of the country. There are indeed many remote or underdeveloped areas in which tourism represents practically the only form of economic activity that offers favourable prospects for the future, and where, as a labour-intensive activity, it has succeeded in replacing forestry and other traditional economies, which occupied more prominent social and economic positions in earlier times than they do today (Saarinen, 2001). The public sector, including the EU, attach considerable importance to the evaluation of the impact of tourism on the regional economy (Valtioneuvosten periaatepäätös, 2001; see also Harrivirta et al., 1998). This evaluation is also seen as supporting administrative measures and development and planning in the tourism industry. As far as public actions to regulate and direct tourism are concerned, however, the methods available for carrying out such evaluations have been regarded as inadequate in some respects (see Sälli, 2000), and it has been admitted that little is known in the public administration in Finland about the economic foundations of the tourism industry, as such, or about the impact of the measures taken to develop it. Tourism is commonly looked on as having a favourable economic and developmental impact at the regional level, introducing new, external sources of monetary income into the regional economy and its operational cycle (Archer, 1982; Murphy, 1985; Roehl, 1998), although it may also entail undesirable forms of change and costs as far as other local sources of livelihood are concerned (Butler, 1999, see Butler et al., 1998). Generally, the regional economics of tourism consist of direct, indirect and derivative effects brought to bear on incomes, employment, earnings and taxation revenues (Fig. 1). Tourists spend money on services and thereby generate direct income and employment effects, whereupon the companies benefiting from this direct income in turn purchase services and goods from other companies, giving rise to indirect income and employment effects in other parts of the economic structure (see Archer, 1982). The resulting transaction chains may vary greatly in length depending on the structure of the region and its business network, and may continue still further in the form of personal purchases made by those gaining employment directly or indirectly from the tourist industry, constituting derivative, or induced effects. A certain proportion of the income from tourism will find its way out of the system, i.e. there will be leaks in the regional economy (Mathieson & Wall, 1982; Murphy, 1985, pp ). Since the development of tourism in a region will provide it with new business activity, tourism and the support given to it will tend to be viewed from the regional development perspective not merely as a matter of competing for consumers, but also of competing for investors and attracting

6 The Regional Economics of Tourism in Northern Finland 95 Fig. 1. The economic impacts (direct, indirect and induced) of tourism on a regional economy (after Hemmi & Vuoristo, 1993, p. 155; Saarinen & Kauppila, 2002, p. 27). new capital. Meanwhile, the important thing for the public sector economy is to know what the effects of the investments and inputs are in relation to the income gained from tourism and what kind of development tourism empowers in the region. Therefore, the desired goals of regional development are not necessarily the same as the tourism industry s outcomes are as a specific economic activity, which is in many cases based on non-locally set priorities, values, needs and goals (Saarinen, 2001; Shapley & Telfer, 2002; Timothy & Ioannides, 2002) However, tourism can be a means of providing economic development in peripheral regions like Northern Finland. In the context of coreperiphery systems, tourism can transfer wealth from the richer urbanized areas to the poorer peripheral regions, which have often fallen below national averages on social and economic indicators related to well-being and quality of life (Telfer, 2002). Tourism can also act as a promoter of modernization in less developed regions, but in order to do so, the region as a whole should also benefit economically from tourism. Therefore, it is imperative to integrate tourism into regional and local development goals:

7 96 Jarkko Saarinen to put tourism and its economic and other impacts in the perspective of larger regional socio-economic contexts (Simmons, 1994; Hall & Page, 1999, p. 253). Evaluation of the effects of tourism on a regional economy: the Nordic model Evaluation of the impact of tourism on regional economies began in the United States in the 1920s and 1930s (Mitchell, 1984, p. 5), and the first research of this kind to be carried out in the Nordic Countries took place in Sweden in the late 1950s and early 1960s (see Frimodig, 1959; Eriksson & Wikström, 1961) and in Finland in the 1960s (see Falenius et al., 1963; Auvinen, 1965). The method most commonly employed nowadays in Finland for evaluating the effects of tourism on regional economies is that known as the Nordic Model (Vuoristo & Arajärvi, 1990; Kauppila, 1999). This was developed in the late 1970s and tested in all the Nordic Countries in 1980 and The pilot regions selected for this purpose in Finland were Kuusamo in North-East Finland ( Jyvälä, 1981) and Jyväskylä in Central Finland (Holopainen, 1981). The Nordic Model concentrates on measuring the economic and employment effects of tourism in specific spatial settings. The model is divided into two main parts, which can be applied either separately or in combination. Normally only one approach is utilized in research. The incomes model examines the economic effects of tourism by means of a questionnaire administered to companies in the region concerned that can be expected to have incomes from tourism, while the expenditure model, of which less use has been made in Finland, sets out to assess the sums of money spent by tourists in the given region by means of a questionnaire administered to the tourists themselves (see more Vuoristo & Arajärvi, 1990). This latter approach also requires an assessment to be made of the overall extent of tourism in the region and its structure, which may be quite a challenging task in many regions and countries. In the model, the regionally-based data is compiled by means of questionnaires (and/or interviews) aimed at determining the annual turnover of companies operating in the district, the proportion of this turnover that was derived from tourism, the numbers of persons employed by the companies, the resulting wage bills and the extent to which the companies purchased goods and services (see Vuoristo & Arajärvi, 1990). The data supplied by the individual companies can be grouped into branches of the economy, employing a generalization factor obtained by dividing the total turnover figure for each branch, as obtained from the company register maintained by Statistics Finland, by the total for the respondent companies in that branch. In order to assess the direct effects of tourism on incomes, the contributions of local demand are then subtracted from the turnover figures on the basis of the individual companies estimates of the proportion

8 The Regional Economics of Tourism in Northern Finland 97 of their turnover attributable to tourism. Indirect income effects are assessed on the basis of the companies purchases of goods and services. The following six categories are generally used to represent the branches of the economy: (1) garages and service stations, (2) general retail stores, (3) other retailing, (4) catering and accommodation, (5) transport, and (6) recreation and other services (Kauppila, 1999, see also Roehl, 1998). The direct effects of the demand created by tourism on employment are assessed from the total employment figures provided by the respondents and their estimates of the proportion of their turnover attributable to tourism. The data is then summed and generalized for the whole district by branches of the economy. The direct effects of tourism on earnings are determined in an analogous manner, a further distinction is made between employees registered as resident in a certain study area (e.g. municipalities) and those resident elsewhere, in order to determine the extent of the leak of taxation revenues from the local economy. The direct and indirect effects of employment in the tourist industry and the resulting earnings on taxation revenues are summed and calculated in monetary terms on the basis of the local rate of taxation. The Nordic Model (incomes model) also allows for the indirect and derivative effects, i.e. the multiplier effects of tourism, to be assessed by analysing companies engaged in the second or third cycle of tourism receipts (earnings) and also taxation revenues (see Vuoristo & Arajärvi, 1990, p. 156). The indirect effects on employment, wages and tax revenues are distinguished, their amount in each cycle being dependent on the proportion of purchases in the previous cycle directed towards the region itself. If most of the purchases in the first cycle (by the primary tourism business) are made outside the region the multiplier effect will be quite small and will consist mainly of the spending in the region by employees of the first cycle businesses. In order to evaluate the multiplier effects in incomes model the questionnaire to the first cycle tourism companies should be designed to gather the necessary information for establishing the contacts in the second cycle companies, and in the second to the third cycle companies, and so on. The results of the second cycle and possible following cycles are calculated in the same manner as the first cycle. The number of cycles depends on the level of detail aimed for and the economic structure of the region. Quite often the indirect effects are ignored entirely because of their low level, which is the case especially in peripheral small tourism regions with narrow economic structure (see Vuoristo & Arajärvi, 1990, p. 159; Saarinen & Kauppila, 2002). Tourism development in Northern Finland Recent development: an overview on the regional structure of tourism In the past few years tourism has developed intensively in Northern Finland. On the basis of the tourism statistics, however, the development has been more moderate than rapid (Fig. 2). The reason for the seemingly mild

9 98 Jarkko Saarinen Fig. 2. Tourism development (tourist over-night visits) in the three northernmost provinces of Finland in Source: Tourism Statistics, Statistics Finland. growth in statistics, especially in Lapland, is caused by the nature of the statistical system in tourism in Finland: only larger units, i.e. more than 10 rooms, cottages or caravan places per enterprise, are included in the statistical system. Thus, smaller accommodation capacity private, semi-private (e.g. time-share systems) or commercial cottages and second homes and changes in their use are mostly unknown as is their total number. Therefore tourism statistics can only be used for trend analysis in regional settings. At the moment, it is not known if the use rates of larger and smaller tourism businesses are equal. It is also important to note that in regional analyses the official statistics may cover only a minor part of the total commercial accommodation capacity. In the Kittilä municipality, for example, about 10% of the estimated capacity is included in official tourism statistics. On the scale of Northern Finland or individual provinces the difference between existing total tourism capacity and tourism capacity in statistics is very difficult, or even impossible, to estimate in an accurate manner. The difficult relation between tourism statistics and tourism capacity or tourist numbers in reality is quite a general problem in many countries, however, especially in the context of regional and local level analysis (see Pearce, 1995, p. 67; Page et al., 2001, pp ). Tourism statistics indicate a total of over 3.3 million overnight visits in Northern Finland, and over 1.5 million guest nights spent in tourist accommodation in Lapland during the year In Kainuu and especially in North Ostrobothnia the statistics imply a clear increase in the number of visitors in the late 1990s. In the past five years the growth has been steady: in North Ostrobothnia the number of tourists has increased almost by 300,000 overnight visits and in Kainuu over 100,000 tourist overnight visits. On the municipality scale tourism development follows a larger trend (Table 1). Statistics indicate a moderate growth, or relatively firm development. The major tourist destinations in Northern Finland are situated in

10 The Regional Economics of Tourism in Northern Finland 99 Table 1. Tourist over-night visits in selected municipalities in Northern Finland in Source: Tourism Statistics, Statistics Finland. Year Enontekiö 99,045 97,432 93,193 95,646 92,910 99,287 94,688 Inari 279, , , , , , ,090 Kittilä 192, , , , , , ,673 Kolari 148, , , , , , ,621 Kuusamo 224, , , , , , ,383 Muonio 53,041 38,363 75,221 80,323 78,275 84,240 Oulu 302, , , , , ,116 Pelkosenniemi 46,261 43,924 43,902 45,860 52,560 52,745 Pudasjärvi 35,817 55,590 55,590 40,127 82,086 75,298 Rovaniemi 282, , , , , ,283 Salla 48,849 41,694 61,882 85,143 87,193 74,575 Sodankylä 67,458 40,508 57,565 78,507 79, ,413 97,630 Taivalkoski 33,215 29,285 29,285 27,541 29,125 the municipalities of Inari (Saariselkä, 8000 bed places), Kittilä (Levi, 15,000 bed places), Kolari (Ylläs, 10,000 bed places) and Kuusamo (Ruka, 14,000 bed places). In addition to those, the cities of Oulu and Rovaniemi are also among the major tourist destinations. Illustration of the past and current growth of tourism in Northern Finland outside the official tourism statistics can be done partially by using the number and recent construction of summer cottages and second homes. Figure 3 shows the amount (numbers in municipalities) and development of summer cottages in the municipalities of Lapland and Koillismaa. Most of the capacity is located in the Koillismaa region (Kuusamo, Pudasjärvi and Taivalkoski), the rural municipality of Rovaniemi (Rovaniemi mlk), Posio, Inari and Kittilä. The growth of summer cottage capacity was very intensive during the 1990s. In almost 50% of the municipalities the cottage capacity increased by more than 30% during the period (see Fig. 3). In Pelkosenniemi (Pyhätunturi tourist destination, 3500 bed places) the growth in the 1990s has been the highest, 56%, and in Kittilä (Levi tourist destination) the number of cottages increased by 48% during the decade. The number of summer cottages does not include commercial or semi-private second-home development, however, which has also been in an intensive development stage in the past few years, but there are no related statistics or estimations on that. In addition to summer cottages and second-homes, there is also a clear growth of tourism in the number of passenger arrivals at the airports of Northern Finland (e.g. Ivalo, Kittilä, Kuusamo and Rovaniemi). In Kittilä airport, for example, the passenger arrivals increased by more than 700%

11 100 Jarkko Saarinen Fig. 3. The amount (on 31 December 2000) and development in the 1990s of summer cottages in Northern Finland. Source: Summer Cottages (2000). during the past 10 years. The development of tourism flights and airports, however, does not strictly indicate the absolute growth of tourism, but the change in tourism. The present mode of travelling in tourism and the current challenging work environment emphasize speed and shorter vacations (see e.g. Rojek, 1993; Mowforth & Munt, 1998). This trend has been concretized in northern Finland, where long weekend journeys using flights are nowadays a possible and commonly used form of vacation. This trend is evident both internationally and domestically. The Rovaniemi region, for example, is increasingly being used for a day or weekend trips by British tourists. In addition, the fast growth and high number of second homes and summer cottages have increased the need for repeating weekend trips to the north by Finnish tourists, who are mainly urban inhabitants from Southern Finland.

12 The Regional Economics of Tourism in Northern Finland 101 The majority of the tourists in northern Finland are domestic visitors on holiday. In 2001 the rate of domestic overnight visits in Lapland was 67.4% and the rate of leisure tourism was 80.9% (Tourism Statistics, 2001). There is regional differentiation between domestic and international tourism and between professional and leisure tourism. The international tourism is concentrated on cities and some major resorts and also certain tourism seasons such as Christmas: the season starts with the British tourists in late November and ends with the Russian tourists in early January. Tourism and its regional structure, including seasonality, are strongly embedded in the core-periphery systems on the international, national and regional level (see Christaller, 1963; Turner & Ash, 1975; Butler, 1994; Walpole & Goodwin, 2000). Seasonality and regional differentiation are intrinsic features of tourism. Nationally, most of the tourists, consumers, live in the centres (cores) and other urban areas, while (some) peripheries and rural regions represent destination regions for vacation and pleasure purposes for urban inhabitants. Centres are also important destinations, however, for the people from other urban areas, as well as the people living in peripheries. In this context, the difference between the centres and peripheries as tourist destinations is related to general travel motivation: the centre attracts both business travellers and increasingly leisure-oriented tourists (see Toivonen, 2002) while the periphery represents mainly a vacationscape for leisure-oriented tourists. Therefore, the structure of tourism in peripheries is strongly based on the holiday seasons of urban dwellers. Figure 4 demonstrates the seasonal nature and also centre-periphery system of tourism in three geographical scales. In the classical meaning, Finland as a nation state does not represent a centre, but as a region it consists of all the major urban and city areas of the country which are lacking in Lapland and Inari. In a strict sense, the Figure demonstrates the seasonal differences in tourism between the different regional scales and the problem of seasonality in peripheries, which is very evident on the basis of the monthly use rates of hotel accommodation capacity. On the State level, the monthly use rates are quite steady throughout the year, which is the result of the high level of business tourism, while Lapland as the most northern province of the country has an obvious seasonality effect in its tourism. The core-periphery relations exist also within the region: in the periphery of Lapland, the northern municipality of Inari has very clear and strict tourist seasons compared to the larger regional scales. Both Inari and Lapland represent vacationscapes for the urban tourist. Thus, the tourism trade in Northern Finland is generally a highly seasonal one. The peak season is spring (mid-february to the end of April) with activities such as Nordic skiing, slalom and snowmobiling. The other important seasons are summer (mid-june to August), autumn (early to mid- September) and Christmas (see Fig. 4), but there are some differences between the municipalities and tourist destinations. For example, in the Kolari municipality the seasonality rate is quite high: the peak four tourism

13 102 Jarkko Saarinen Fig. 4. The seasonality of tourism in different geographical areas. Source: Tourism Statistics 1999, Statistics Finland. months (one third of the year) cover over two-thirds (72%) of the total overnight tourist visits, but in Inari the peak four tourism months represent only 45% of the total number of visits (Saarinen, 2002). In Inari, the more positive rate is based on a relatively strong summer season, which can be explained by the geographical location: Inari and its resorts and tourist destinations are mainly located along the road to North Cape, Norway, which is one of the major international tourist attractions in Northern Scandinavia. Thus, international motor and coach tourism use the region effectively in summer. There is also the Ivalo airport in the municipality, which serves the tourism industry at the Saariselkä tourist destination (see Saarinen, 2001). Kittilä and its main tourist destination Levi is not located along any major tourist route and therefore its summer season is a relatively small one. Impact of tourism on income and employment In Finland the tourism industry is not represented in income or employment statistics, as such. Generally, tourism income and employment figures are based on estimations on the national level and on specific surveys on the regional and local level. Based on the national level estimations, the tourism industry provided over 1.5 billion from foreign tourism and about 5 billion from domestic tourism in 1998 (see Valtioneuvoston periaatepäätös, 2001). The employment effect was approximately 98,000 jobs (full-time employment throughout the year).

14 The Regional Economics of Tourism in Northern Finland 103 The Nordic Model has been used on both the larger regional and local municipality level in Finland, the latter being exemplified by studies of tourism impacts in Lohja (Vuoristo & Arajärvi, 1988), Kuusamo (Kauppila & Ervasti, 2001) and Virrat (Pitkänen, 1990). In addition, it has occasionally been applied to individual tourist resorts and destinations such as Hiekkasärkät in Kalajoki (Kemi & Mäkinen, 1995) and Saariselkä in Inari (Saarinen et al., 1996). Table 2 shows direct income and employment figures in selected municipalities in Northern Finland. Estimated in accordance with the Nordic Model, direct income from tourism in the municipality of Kuusamo in 1997 was almost 52 million and in Inari 47.5 million. In the other municipalities illustrated in Table 2 the economic effects are much lower, which does not imply their low relative importance in the regional economic structure. There are no calculations on indirect or induced effects on all the municipalities but in the case of Kuusamo the indirect effects were 6.2 million and in Inari 2.4 million (see Alakiuttu & Juntheikki, 1999; Hätälä & Kauppila, 1999). Thus the calculations of direct income and employment effects shown in Table 2 represent only a part of the total effects of tourism in the regional context and only a limited use of the Nordic model. The rather significant contrast in the indirect effects compared to the difference in direct effects between the municipalities is based on the difference of the regions economic structures and their relative location in the core-periphery system: as mentioned, Inari clearly represents a peripheral region with narrow economic structure which leads local tourism business (the first cycle companies) to purchase outside the region. The major differences between the direct economic effects on a regional scale are related to the income structure. For example, in the municipalities of the Kuusamo and Inari the majority of incomes are based on hotels and restaurants (in Kuusamo 38% and in Inari 56%) and general retailing (in Table 2. Direct income and employment from tourism in the selected municipalities in Northern Finland. Monetary figures for selected years include VAT and are rounded to the nearest hundred Euros. Jobs are calculated to be full-time through the year. Sources: Alakiuttu & Juntheikki (1999); Hätälä & Kauppila 1999; Saarinen (2001); Saarinen & Kauppila (2002). Direct Percent of Direct employment Direct tourism recreation and employment effect outside Municipality income (euros) other services effect (total) municipality Inari ( 97) 47,522, (23%) Kuusamo ( 97) 51,825, (8%) Pelkosenniemi ( 99) 7,851, (41%) Pudasjärvi ( 97) 16,114, (6%) Salla ( 99) 5,355, (9%) Taivalkoski ( 97) 6,533, (2%)

15 104 Jarkko Saarinen Kuusamo 13% and in Inari 22%) (see Alakiuttu & Juntheikki, 1999; Hätälä & Kauppila, 1999). One important difference, which has a close relation to the amount of employment and its local connections, lies in naturebased tourism or other such outdoor activities in tourism. In the Nordic Model nature-based tourism as an activity is included mainly in the economy branch of recreation and other services. In Kuusamo about 20% of direct income came from recreation and other services in 1997 while in Inari only 7% accumulated from that source in the same year. In Pelkosenniemi, which serves as an example of detailed municipality level analysis (Table 3), the share of recreation and other services was only 1.3% in 1999, while the total income was about 7.8 million. The recreation services are much more employment-oriented than restaurant and accommodation services or general retailing (Kauppila, 1999). There is also a need for local knowledge in the business environment and nature-based activities and skills in recreation services, which encourages the tourism industry to employ local people. On the general level, this is evident in the municipality level employment figures. The tourist companies in the municipality of Kuusamo employed a total of 465 persons during the year 1997, of whom 428 were registered as resident there (see Table 2). Thus, only 8% of the employees were resident outside the municipality and one full-time throughout the year job required about 111,500 direct income in the tourism industry. In Inari, one full-time throughout the year job needed about the same income ( 112,900 income per calculated job) but the industry employed 95 people (23%) from outside the municipality. In Pelkosenniemi one job required only 76,200 direct income, but the industry provided jobs for 42 people from outside the municipality, which can be regarded as a quite high ratio (41%). Table 3. Direct income from tourism in the municipality of Pelkosenniemi, in 1998 and The 1998 figures correspond to the 1999 currency value (Euros). Figures are rounded to the nearest hundred Tourism Tourism Tourism Tourism income income income income (%) Economic branch (excl. VAT) (excl. VAT) ( 99) Hotels and restaurants 5,093,000 5,991,000 5,991,000 7,048,000 76,0 General retailing 1,382,000 1,544,000 1,666,000 1,860,000 20,1 Other retailing 101, , , ,000 1,5 Transport 98, , , ,000 1,1 Recreation and other 101,000 95, , ,000 1,3 services Total 6,777,000 7,839,000 8,022,000 9,278, Figures for the branch Garages and services stations cannot be quoted for reasons of Personal Data Act.

16 The Regional Economics of Tourism in Northern Finland 105 The most probable reason for the relatively low costs per job in Pelkosenniemi is caused by the large number of seasonal short-time employees at the Pyhätunturi tourist destination (Saarinen & Kauppila, 2002). The high seasonality and the quite low ratio of recreational and other services both indicate low local (municipality) employment, which emphasizes the sustainability issues and possible related problems in the relationship of the tourism industry and localities (see Butler, 1994; Nyberg, 1995). Conclusions: Possibilities of developing the long-term benefits of tourism on the regional scale The basic problem in the evaluation of the regional economics of tourism lies within the very nature of tourism itself: tourism is a system, which consists of a movement of people and their stay and consumption in various locations and the different sectors of the economies and activities supporting the system (see Chadwick, 1994). The impacts of tourism vary greatly depending on the place, time and nature of tourism activities. Tourists use services that are part of several economic branches. Thus, tourism is a set of branches or a cluster of different economies rather than a single independent form of economy. This very nature of tourism also emphasizes the need to think of the connection of tourism activities to other economies and social systems in the regions used by the tourism industry and what impact those connections (or disconnections!) have in the regions and how they could be developed. One fruitful perspective on the regionally and locally beneficial and, perhaps sustainable, use of local resources in tourism is to develop increasing links between the tourism industry and other livelihoods using the same resources and locations. According to Poon (1993, p. 205) the boundaries within the tourism industry and between this industry and others are already becoming increasingly blurred. In addition, a paucity of such linkages has been noted one of the major factors limiting local benefits from tourism development (Walpole & Goodwin, 2002, p. 572). In order to develop deeper linkages between the tourism industry and traditional local and regional economies and production sectors, tourism must be placed in the regional socio-economic context. The regional development, well-being, sustainable use of resources and environment are the goals where tourism could and should contribute in synergy with other economies and functions (Fig. 5). By using the social capital of a destination region, tourism could more effectively benefit both regional development and its own economic growth purposes. However, there has to be incentives for increased mutual benefits, which quite often require a long-term development and planning perspective from different stakeholders. The usage of regional social capital does not only require increasing interaction and networking between the tourism industry and other sectors

17 106 Jarkko Saarinen Fig. 5. The tourism industry in its local economic and social context: by linking tourism and other local productive livelihoods the economic and employment effects of tourism can be multiplied (see also Kauppila, 2000). At the same time the negative impacts of seasonal changes of tourism to local or tourism-based communities can be regarded to be lower than in the situation of monoculturing tourism. of the regional economy and communities, but also mutual benefits and agreement on practices and related norms and trust between the actors and organizations (see Portes, 1998, 2000; Hall & Page, 1999, p. 253). In a positive situation tourism development may encourage the growth of social capital, including the so-called cultural economy (see Kneafsey, 2001), in host communities and organizations. In the current situation and context in northern Finland and on the basis of the regional structure and employment effects of tourism, the present challenge is to link tourism development more strongly to the local and regional traditional knowledge, economies and production of goods and services. In both practice and theory, tourism is an inter-related system where demand and supply factors are highly dependent on each other. Therefore, from the perspective of the region and the industry, it is important that future tourism planning in northern Finland aims for integrated development of all the parts and partners (stakeholders), including host regions, communities and infrastructure such as the transportation system and public services (see Inskeep, 1994, p. 5 6). The goal of such an integ-

18 The Regional Economics of Tourism in Northern Finland 107 rated approach to tourism development is to analyse tourism from the regional scale to individual projects in the industry within the region and regional development perspectives. The integrated strategy of tourism development may, for example, resolve potential conflicts over the use of certain resources and locations and assist in the distribution of the benefits and costs more equitably (Hall & Page, 1999, p. 253). Without the emphasis of integrated approach, the current development of tourism in many parts of Northern Finland is partly, or in some cases mainly, using regional resources solely for its own economic purposes. From the industry s perspective that may be logical, but it may also marginalize and perhaps only stage the local way of life for tourism purposes, which has been evident in the relation between the industry and the Sami culture, for example (see Saarinen, 2001, pp , 75 78). This may lead, as Mitchell and Reid (2001, p. 114) have stated, to a situation where local people and their communities have become the objects of development but not the subjects. In that case, tourism is not used as a vehicle but rather as an end in itself without any active integration towards regional or local development goals. This kind of tourism development does not create trust in the regional context and it may discourage the accumulation of the social capital and lead to the loss of traditions and knowledge by increasing the regional insecurity and differentiation. The seasonality of tourism is already problematic, and not only for the industry itself, but its consequences in the long term for peripheral places, such as Pelkosenniemi or Inari in Finnish Lapland, can be dramatic. In tourism driven communities and regions the seasonality of tourism will be reflected more strongly on everyday living, communities, employment and the changing scale of services, i.e. between the peak seasons there are no work and no services (see Fredrick, 1993). Therefore the industry itself and regional tourism strategies should really aim for integrated strategies and local participation in tourism development and product design. At the present time, local communities in destination regions are becoming more and more dependent on tourism. These destination communities are based mainly on tourism, which may support some local livelihoods and larger communities as well. In a positive situation, tourism can maintain public services in peripheral places in spite of the current logic of neoliberal politics which leads to the cutting-off of public sector services and high rates of out-migration, as has occurred dramatically in Finnish Lapland and Eastern Finland. The current trend in tourism production, however, is not moving towards the greater use of local knowledge and traditional uses of resources. There seems to be a lack of integration incentives in the tourism industry and in many cases also a shortage of knowledge, skills and will among local authorities and labour to see the tourism sector as a service-oriented mode of production. Thus, in reality the deeper integration between tourism and

19 108 Jarkko Saarinen other regional industries and development goals is a long-term process with many obstacles. For example, from the perspective of traditional branches of the local economy in Northern Finland such as forestry or reindeer husbandry, tourism development can also represent a competing and conflicting land-use activity. Global competition for resources and priorities in land use and planning is increasing in connection with traditional economies and indigenous cultures, such as the Sami. In sustainable tourism development the emphasis is on the maintenance of tourism activities. However, tourism may not be the most favourable or wisest use of natural or cultural amenities and resources in specific locations in the long term (Kariel, 1989; Butler, 1999). In this context, the mission and value of tourism research and examination of tourism economics on local or regional scales lies in evaluating and providing perspectives on the sustainable and ethical use of nature and culture within tourism development and the globalizing world system that has great impacts on local realities and everyday life in peripheral areas (see Butler et al., 1998; Leslie & Reiner, 1999; Gordon & Goodall, 2000; Verpole, 2000). There are positive trends and possibilities to integrate the growing and changing tourism and regional and local long-term well-being. One of the main trends is the increasing use of second homes and seasonal cottages: destinations are used increasingly as seasonal living places and for distant working, which supports local private and public services and provides opportunities to work outside the traditional tourism services (e.g. construction work, material production) and also outside the main tourism seasons. Second homes may also provide possibilities to create new products and events for seasonal inhabitants and tourists to consume (see Hartmann, 1986; Baum & Hagen, 1999; Williams & Hall, 2000). The second home development also generates significant new employment opportunities in the construction phase and afterwards to support those houses and other related infrastructure. However, the use of local resources, labour and knowledge should be actively stressed in the planning processes and integrated development strategies (see Simmons, 1994; Gallant & Twedwr-Jones, 2000; Muller, 2002). The other positive trend in this context is the growing segment of naturebased tourism in Northern Finland. For example, the average number of visits in Finnish National Parks has almost doubled during the 1990s and in Northern Finland the development has been even stronger (see Saarinen & Vaara, 2002). Nature-based tourism and related activities are in many cases based on the usage of the skills and knowledge of people in traditional local economies. As noted, nature-based tourism and other recreation services are also work-intensive sectors which do not always require long or special training compared to many other fields of tourism service work. Therefore, nature-based tourism has a good potential to provide employment opportunities and well-being to local inhabitants in tourism and related economic sectors such as reindeer herding, forestry and other nature-based

20 The Regional Economics of Tourism in Northern Finland 109 livelihoods. However, as discussed above, there are also obstacles to overcome, such as local negative attitudes towards service work, and in spite of the smaller mean loan size for investment projects in tourism than for many other businesses in the rural context (see Fleischer & Felsenstein, 2000, pp ), there is a lack of capital invested in peripheral communities to encourage them to enter the industry as an outdoor recreation, heritagebased or other such entrepreneurial activities. There is increasingly a need to develop accurate approaches to evaluating the regional economics of tourism and how to integrate tourism more closely into the regional development and its goals. The evaluation and prediction of the growth and stimulation effects of tourism development are needed from the industry, public sector and local community perspectives in order to create jobs and well-being in peripheral areas. Also the European Union s regional policy is reliant to a great extent on selfdetermined regional development taking place through Objective Programmes and Community Initiatives, in which projects for the development of tourism and its potential links to local socio-economic processes at different levels have played a significant part, both in Finland and in other marginal areas of the EU (Talonen et al., 2000). The regional and local figures based on the Nordic Model or other such research-based evaluation methods are estimations not objective figures. In the Nordic Model s income approach the method is based on the entrepreneur s evaluation of the rate of tourism income (tourist consumption versus local consumption) in his or her business and in the expenditure approach to the tourist s evaluation on money spent in a certain region. The expenditure model also requires the researcher s evaluation of the total number of tourists, which is quite problematic in some cases. Still, the Nordic Model has so far been one of the most reliable sources of information on the regional economy of the tourism industry in a Finnish context. However, the development of satellite accounting of tourism may also provide new possibilities for the regional and local scale analysis, and it has been used for example in the Nordic countries, including Finland (see Laakkonen, 2002) and Norway ( Johansen et al., 2002). Satellite accounting provides a practical, timely and comparable basis for the national level analysis of the economic impacts of tourism but it may still need further methodological development if applied on a local or regional scale (Saarinen, 2002). References Alakiuttu, K., & Juntheikki, R. (1999). Matkailun aluetaloudelliset vaikutukset Inarin kunnassa. Nordia Tiedonantoja, 4, Allen, J., Massey, D., & Cochrane, A. (1998). Rethinking the Region. London and New York: Routledge. Archer, B. H. (1978). Tourism as a development factor. Annals of Tourism Research, 5,