The Economic Importance of Tourism

The Economic Importance of Tourism The UK Tourism Satellite Account (UK-TSA) for 2008 Edition No.: 1.0 Editor: Eddie Smith, Dominic Webber, Sean White Office for National Statistics May 2011 1.0

The Economic Importance of Tourism 1.0 About us Copyright and reproduction The Office for National Statistics The Office for National Statistics (ONS) is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to Parliament. ONS is the UK government s single largest statistical producer. It compiles information about the UK s society and economy, and provides the evidence-base for policy and decision-making, the allocation of resources, and public accountability. The Director- General of ONS reports directly to the National Statistician who is the Authority's Chief Executive and the Head of the Government Statistical Service. Crown copyright 2011 You may re-use this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, go to: http://www.nationalarchives.gov.uk/doc/opengovernment-licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU email: psi@nationalarchives.gsi.gov.uk. The Government Statistical Service The Government Statistical Service (GSS) is a network of professional statisticians and their staff operating both within the Office for National Statistics and across more than 30 other government departments and agencies. Contacts This publication For information about the content of this publication, contact: Sean White Tel: 01633 455687 Email: sean.white@ons.gsi.gov.uk Other customer enquiries ONS Customer Contact Centre Tel: 0845 601 3034 International: +44 (0)845 601 3034 Minicom: 01633 815044 Email: info@statistics.gsi.gov.uk Fax: 01633 652747 Post: Room 1.101, Government Buildings, Cardiff Road, Newport, South Wales NP10 8XG www.ons.gov.uk Media enquiries Tel: 0845 604 1858 Email: press.office@ons.gsi.gov.uk Office for National Statistics 2

The Economic Importance of Tourism. The UK Tourism Satellite Account (UK-TSA) for 2008. Eddie Smith, Dominic Webber, Sean White. Contents Executive Summary...3 1. Introduction...4 2. The Tourism Satellite Account Explained...5 2.1 TSA Concepts... 6 2.2 The TSA Tables... 8 2.3 The TSA Aggregates... 10 3. The UK-TSA for 2008...12 3.1 Table One: Inbound Tourism Expenditure... 12 3.2 Table Two: Domestic Tourism Expenditure... 13 3.3 Table Three: Outbound Tourism Expenditure: Non-Domestic... 16 3.5 Table Five: Production of Tourism Commodities... 18 3.6 Table Six: Domestic supply and consumption by product... 20 3.7 Table Seven: Employment and Labour... 22 4. Developing the TSA framework for the UK...27 4.1 The Demand Side... 27 4.2 The Supply Side... 31 5. Conclusions...32 References:...34 ANNEX A.A1 Office for National Statistics 1

List of Figures Figure 3.1 Inbound tourism expenditure in the UK by product 2008... 13 Figure 3.2 Domestic overnight visitors tourism expenditure in the UK by product 2008... 14 Figure 3.3 Domestic excursionists tourism expenditure in the UK by product 2008... 15 Figure 3.4 Domestic outbound tourism expenditure in the UK by product 2008... 16 Figure 3.5 Non - domestic outbound tourism expenditure in the UK by product 2008... 17 Figure 3.6 Internal tourism consumption by product 2008... 18 Figure 3.7 Tourism Ratios for industries in 2008... 21 Figure 3.8 Tourism Direct Gross Value Added of Tourism Industries in 2008... 22 Figure 3.9 Number of Employees by Sex in the Tourism Activities 2008... 25 Figure 3.10 Direct Tourism Employment in the UK (2008)... 26 Figure 4.1 Figure 4.2 Illustration of the effects of changes to data sources by visitor type: Internal tourism consumption 2008 compared to experimental TSA data 2006... 28 Illustration of the effects of changes to data sources by product: Internal tourism consumption 2008 compared to experimental TSA data 2006... 28 Figure 4.3 Internal tourism consumption on other products by visitor type 2008... 29 Figure 4.4 Expenditure on selected HHFCE and equivalent TSA products 2008... 30 Figure 4.5 Expenditure on personal transport and passenger transport services within the UK 2008... 31 Office for National Statistics 2

Executive Summary This report describes a new UK Tourist Satellite Account (UK-TSA) for the reference year 2008. The UK-TSA allows us to separate the regular household expenditure of UK residents from that of tourists, both domestic and overseas, which are taken together in the main National Accounts. The UK-TSA is a complex account that attempts to reconcile demand data from tourism surveys with information on the supply of goods and services generated by tourism related industries within a System of National Accounts framework. The UK-TSA is a technique that seeks to calculate the value of tourism in a way that allows it to be compared with other economic activities, and with tourism elsewhere. In this UK-TSA there are a number of improvements in methodology and data inputs over the previous experimental TSA for 2006, for example the extent of employment in tourism characteristic and connected industries is examined. The UK-TSA shows that 2008 tourists spent almost 114 billion on trips within the UK. This total comprises of 96.3 billion spent within the UK by UK residents and 16.3 billion spent in the UK by overseas visitors. A further 1 billion was spent by UK residents on the upkeep of holiday homes. The domestic spending on tourism trips includes 21.3 billion spent on overnight visits and 48.3 billion spent during same day visits. Of the spending on foreign tourism, 26.9 billion was spent in the UK on items such as air fares and travel agencies services. Additionally 36.8 billion was spent by UK residents abroad. Important categories for domestic tourists spending within the UK included food and beverage services, at 19.3 billion, accommodation ( 6.9 billion), passenger transport services ( 3.6 billion) and cultural services ( 3.2 billion). However, the biggest single category was the miscellaneous other consumption products ( 33.0 billion) which includes items such as retail and the operation of personal transport. The biggest item of their spending within the UK on foreign trips was on air fares ( 15.7 billion). The account also looks at what foreign tourists spent in the UK. Of their total spending of 16.3 billion, the biggest slice was accounted for by other consumption products ( 7.3 billion). This was followed by accommodation ( 4.7 billion) and food and beverage services ( 2.8 billion). Also examined is the tourism ratio of these different sectors the proportion of the domestic supply of tourism-characteristic products that is consumed by tourists. The highest ratio was for accommodation at 84 per cent followed by travel agency services at 68 percent and cultural activities at 66 per cent. The tourism ratios allow us to calculate the direct gross value added of tourism which stood at just under 47 billion in 2008. This TSA includes estimates of tourism employment in the UK and shows that total employment in tourism related industries in 2008 was 3.4 million with employment supported directly by tourism spending standing at just over 1.7 million. Office for National Statistics 3

1. Introduction In October 2010 the Tourism Intelligence Unit (TIU) at ONS published an experimental Tourism Satellite Account (TSA) for the UK for 2006 drawing on available data sources and adhering to international guidelines set out by UNWTO, EUROSTAT and OECD. The TSA is a complex account that attempts to reconcile demand data from tourism surveys with information on the supply of goods and services generated by tourism related industries within a System of National Accounts framework. The TSA is a technique that seeks to calculate the value of tourism in a way that allows it to be compared with other economic activities, and with tourism elsewhere. This paper details the development of a new TSA (reference year: 2008) for the UK. In this TSA there are a number of improvements in methodology and data inputs over the previous experimental TSA for 2006, for example the extent of employment in tourism characteristic and connected industries is examined. The TSA is compiled by the TIU at ONS. The TIU was set up within ONS in August 2008 with funding from the nine English Regional Development Agencies and Visit England. The aim of the unit is to make improvements to tourism statistics, especially those that relate to the tourism industry, the visitor economy and the economic impact of tourism. In the initial phase of work, the TIU was charged with reviewing the various Tourism Satellite Accounts that have been produced in the UK and elsewhere and how TSAs might be used and developed in future. As this review process progressed, the importance of a TSA in contributing to an Integrated System of Tourism Statistics (ISTS) became clear. Indeed, where such an integrated system exists (examples include Canada and New Zealand), the TSA is regarded as the central component and is used as a tool to not only assess the value of tourism but also to identify gaps in our knowledge of the sector. Furthermore the TSA can be employed to illuminate linkages between tourism and other parts of the economy within a national accounting framework, for example with environmental accounts or household consumption expenditure. In this report we first provide some context to the reader about the purpose and aim of the TSA, before examining the UK-TSA for 2008 in detail for each of the tables compiled. Following the discussion of the TSA tables we provide more detail on the methodological development work that has been undertaken to improve the robustness of the TSA estimates and highlight where further development work is needed. We then provide some conclusions and areas of future development. Office for National Statistics 4

2. The Tourism Satellite Account Explained In this section we comment on the natural complexity involved in the measurement of the economic contribution of the tourism sector. Jones (2005) comments upon how the measurement of tourism in economic terms has historically been very difficult. This is because tourism is not an industry (in the same way as electronics, or insurance for example). Jones (2005) illuminates the issue further by stating that a wide range of products are purchased by visitors from their destinations before, during and after any tourists visit. It is then the economic value within a given nation or region of all the purchases made, and the employment dependent upon the production and distribution of these goods, that we should think of as the tourism economy. Two measurement problems become evident here. The first involves issues around the expenditure of visitors and the second concerns employment data in tourism related industries. Visitor expenditure data can be misleading because not all expenditure will be on goods and services produced within the region being visited. For example, an item purchased in a shop while on holiday could be imported from elsewhere. Additionally, merely calculating employment in all tourist related industries such as hotels or recreation will also be inaccurate as not all employment in tourism industries will be tourism-dependent (a good example is the case of a hotel bar used by local residents) (Jones, 2005). In general terms, a satellite account is an extension to a system of national accounts (SNA) which enables an understanding of the size and role of economic activity which is usually hidden within such accounts. Using a SNA framework to examine tourism is important as, in essence, this allows (through the TSA) for the separation of expenditure of residents and tourists. This enables the estimation of key variables such as how much individual industries depend upon tourists, and, by extension, how much value-added and employment is supported by tourists. The challenge, therefore, is to measure economic activity generated by tourism in such a way that it enables comparison to be made with other activities taking place in the same reference area. By adding complexity to existing SNA we can reveal the economic worth of tourism activity. It follows from this that there is potential for embedding the tourism sector more fully into the national accounts framework through the mechanism of a satellite account. Bryan et al (2005), in their review of TSAs at the regional level in England, suggest a number of advantages to placing a measurement of tourism within already established accounting frameworks, additional to the ability to compare tourism with other economic activities. They conclude that the measurement of tourist-related economic activity is greatly enhanced due to the consideration of both the demand and supply sides of tourism and, furthermore, that the methodology of TSA derivation can be referenced within the wider and longstanding methodology associated with national accounting. It can also be possible to have some international comparison given the accepted methodology in place for the derivation of TSAs produced by the UN World Tourism Organisation, OECD and Eurostat. Indeed, results from the previous experimental TSA for the UK for 2006 can be viewed alongside other EU member states TSAs in a recent Eurostat publication (Eurostat, 2010). Office for National Statistics 5

2.1 TSA Concepts In terms of the actual formulation of TSAs, there are a number of conceptual issues which can usefully be explained at this stage to provide a context for the development work presented here. The standard definition of tourism is highlighted within the International Recommendations on Tourism Statistics (IRTS 2008) from UNWTO, OECD and Eurostat to reflect the importance of defining what a visitor is and how that is related to travel (tourism being a sub-set of travel). A visitor is a traveller taking a trip to a main destination outside his/her usual environment, for less than a year, for any main purpose (business, leisure or other personal purpose) other than to be employed by a resident entity in the country or place visited. These trips taken by visitors qualify as tourism trips. Tourism refers to the activity of visitors (IRTS 2008, para 2.9). There are different forms of tourism characterised by the various categories of visitor. These are primarily made up of domestic tourism (which includes visitors staying overnight or taking day visits within their own country) and inbound and outbound tourism which includes visitors to and away from the reference country. In combination these different forms of tourism can be termed internal or national tourism (see Table 2.1). Table 2.1: Different Forms of Tourism Within the Country Outside the Country Total Residents Domestic Tourism Outbound tourism National Tourism Non-residents Inbound Tourism Total Internal Tourism There are further important classifications available internationally that relate to the different main purposes of a tourism trip, in particular the concept of tourism expenditure. This can be further elaborated upon with reference to different categories of expenditure which may vary according to the classification of the purpose of the trip. The TSA Recommended Methodological Framework of 2008 from UNWTO, OECD, and Eurostat (TSA:RMF 2008 hereafter) attempts to clarify these important classifications. It does this by acting, firstly, as a statistical tool that complements those concepts, definitions, aggregates, classifications, already presented in the IRTS 2008 and articulating them into ten analytical tables. Those tables provide elements to validly compare estimates between regions, countries or groups of countries. These elements are also comparable with other internationally recognised macroeconomic aggregates and compilations (TSA:RMF, 2008). Secondly, the TSA:RMF 2008 acts as the framework to guide countries in the further development of their system of tourism statistics, the main objective being the completion of the TSA, which could be viewed as a synthesis, or the core, of such a system (TSA:RMF, 2008). Within the TIU at ONS the development of an Integrated System of Tourism Statistics (ISTS) is a particular goal and the TSA is viewed as a principle component of that system from which other derived statistics are Office for National Statistics 6

then possible to produce, for example producing regional estimates of the value of tourism based on a national level reconciliation of the supply and demand components of tourism. The TSA provides the conceptual framework for the comprehensive reconciliation of tourism supply and demand data. Therefore, for any country undertaking a TSA there is a necessity for a consideration of tourism internal demand including not only tourism consumption (or expenditure of tourists), but also tourism gross fixed capital formation and tourism collective consumption. To undertake this kind of tourism measurement and analysis within a SNA framework requires a particular classification of products and productive activities. The classification refers to (1) products, mainly those belonging to tourism expenditure, and (2) productive activities that are the basis for defining tourism industries (TSA:RMF, 2008). Products can be sub-divided into those that are associated with consumption and those not (non consumption products). Tourism characteristic activities are those that typically produce tourism characteristic products. The relationship between activities and products can be shown in the following table 2.2 (source: TSA:RMF 2008). The list of tourism industries recommended here is further elaborated in the IRTS and is based on International Standard Industrial Classification codes for 2007 (ISIC2007). Early work towards producing a UK TSA involved a re-classification of tourism industries from SIC 2003 to SIC 2007 categories, in line with international recommendations (IRTS, 2008). At this point it is worth noting that the Supply Use Tables (SUT) that we draw upon in producing the UK-TSA are based on SIC 2003 codes so this conversion process to the new SIC 2007 categories is an important first stage. Table 2.2: Categories of Tourism products and activities List of categories of tourism characteristic consumption products and tourism characteristic activities Products Activities 1. Accommodation services for visitors 1. Accommodation for visitors 2. Food and Beverage serving services 2. Food and Beverage serving activities 3. Railway passenger transport services 3. Railway passenger transport 4. Road passenger transport services 4. Road passenger transport 5. Water passenger transport services 5. Water passenger transport 6. Air passenger transport services 6. Air passenger transport 7. Transport equipment rental services 7. Transport equipment rental 8. Travel agencies and other reservation services 8. Travel agencies and other reservation services activities 9. Cultural services 9. Cultural activities 10. Sports and recreational services 10. Sports and recreational activities 11. Country-specific tourism characteristic goods 11. Retail trade of country-specific tourism characteristic goods 12. Country-specific tourism characteristic services 12. Country-specific tourism characteristic activities Source: TSA:RMF, 2008 Office for National Statistics 7

To summarise the purpose of the tourism satellite account is to provide an overview of the supply and use of goods and services for the various types of tourism and to reconcile the supply of these products with the demand for them, or consumption, by tourists. This reconciliation is crucial in both national accounts generally, and the TSA. It ensures there is no double counting of activity, and headline indicators, such as value added and employment (if derived) are then comparable with other industries (Jones et al, 2004). The demand generated by tourism encompasses a great variety of goods and services, in which transportation, accommodation and food services play a major role as seen in Table 2.2. Defining the tourism sector in terms of products is a difficult area but, in essence, the test is whether the products would probably cease to exist in a meaningful quantity or at least the level of consumption would be significantly reduced, in this case we would refer to these products as Tourism Characteristic Products. A secondary category, however, is termed Tourism-connected products which are a residual category, including those that have been identified as tourism-specific in a given country but for which this attribute has not been acknowledged on a worldwide basis (TSA:RMF, 2008). Elaborating on the demand side of tourism, the key-concept is visitor consumption, which can include, according to TSA:RMF 2008, visitor final consumption expenditure in cash, visitor final consumption expenditure in kind, for example own account housing services; tourism social transfers in kind, in other words individual non-market services absorbed by visitors, for example, health services of a spa or the non-market services of a museum; and Tourism business expenses. Tourism business expenses includes tourism expenses classified as intermediate consumption but does not include some other expenses relating to employees on business trips that have been paid for by their businesses, such as payments for meals treated as remuneration in kind. As a consequence, tourism business expenses are a difficult area to capture accurately in the TSA and do not, typically, represent the total consumption of visitors on business trips (TSA:RMF, 2008). Returning to the SNA framework within which the TSA operates, it is the case that the supply and use of goods and services for tourism purposes, including value added and employment generated by tourism, can systematically be shown by a supply and use table providing that we are distinguishing between tourism characteristic products and industries and the additional, or secondary, tourism-connected products (which are normally referred to as other consumption products in the TSA tables). We now turn our attention to explaining the composition of the TSA in relation to its constituent tables. 2.2 The TSA Tables The UNWTO, OECD and EUROSTAT recommend 10 tables for use in a TSA but only tables 1-6 are currently considered as core. These are shown in Table 2.3 below. Table 6 is regarded as the heart of the TSA reconciling data found elsewhere in the TSA (Tables 4, which synthesises data from Tables 1 and 2 which relate to inbound and domestic tourism expenditure, and Table 5 relating to the products produced by tourism activities). The constituent tables are shown in Table 2.3 adapted from TSA:RMF 2008. Office for National Statistics 8

Some tables are easier to estimate than others, and it is usual that a TSA is published incrementally as data and estimation methods allow. It is normal for elements of each table to be subject to revision as data improves or estimation methods are revised and refined (Jones et al, 2004). Notwithstanding this, we would wish the estimates of the tables completed to be accurate based on the data that feeds into them. If there are data deficiencies, particularly on the demand side from tourism surveys, that impact on this accuracy then we would wish to highlight this as an area of concern. One of the benefits of the TSA production process, for any country, is the ability to analyse where deficiencies or gaps in data exist and recommend improvements. Indeed, one of the most difficult issues in the construction of a TSA tends to be related to the availability and reliability of tourism consumption data. The construction of a fully-fledged TSA requires information on the nature of tourists expenditure by individual commodities and information on how the economy supplies the commodities that tourists buy, for example whether through imports or local production. It also requires the ability to place the above information consistently within an accounting framework such that demand can properly be equated to supply for every commodity which is of interest (Jones et al, 2004). This can be problematic when the surveys that collect information on tourism behaviour are not consistent in their treatment of, for example, purpose of trip and expenditure categories. Taken collectively, the TSA tables make it possible to identify the branches of tourism which generate the most value added, those that create the most jobs and those for which tourism consumption is highest. Developing a TSA requires from the compiler not only a transformation and partitioning of the information already existing in the supply and use tables of the country (particularly in relation to Table 5) but also a basic set of direct data collection procedures regarding tourism data. In other words the demand side features of the tourism sector need to be collected and analysed within the TSA framework and presented in Tables 1 and 2. Office for National Statistics 9

Table 2.3 : The TSA Tables Tourism Satellite Account The Constituent Tables 1. Inbound tourism expenditure Part of aggregate demand; i.e. an export 2. Domestic tourism expenditure Part of domestic total consumption 3. Outbound tourism expenditure generally linked to other TSA tables so is often not estimated 4. Domestic tourism final consumption Synthesised from Tables 1 & 2 5. Production of tourism commodities For example the services and products of tourist related industries but also of non-tourist related industries 6. Domestic supply & consumption by product A reconciliation of Tables 4 & 5. The heart of the TSA 7. Employment & labour use Employees, Self Employed, FTEs and Tourism Direct Employment 8. Tourism Fixed capital formation (investment) Not Currently Reported 9. Tourism Collective Consumption Not Currently Reported 10. Non-monetary Indicators For example, tourism volumes/nights. This is not reported here. Source: TSA:RMF, 2008 2.3 The TSA Aggregates In this section of the paper we highlight briefly what we might term the key outputs from a TSA, although these may similarly be termed the statistics that would generate the most interest in policy terms. These outputs are often referred to as the TSA aggregates. A number of macroeconomic aggregates can be derived that describe the size and the economic contribution of tourism, such as tourism direct gross value added (TDGVA) and direct tourism employment, consistent with similar aggregates for the total economy, and for other productive economic activities and functional areas of interest. These aggregates require, however, the formulation of a so-called Tourism Ratio which is a key measure from the TSA in that it reconciles demand and supply through the computation of a simple ratio of the sum of all the demand side data components to the total obtained from the supply side data components. 1 These are measures that reflect the reconciliation of supply and demand within the TSA and therefore refer to the direct impact of tourism on the economy. The TSA, however, does not undertake a measurement of the indirect and induced effects of tourism consumption on the economy as a whole. This can only be achieved through alternative 1 In the E-UKTSA 2006 we labelled the Tourism Ratio the Demand-to-Supply Ratio (DSR). They are the same thing and calculated in the same way. Office for National Statistics 10

forms of analysis such as input-output analysis or computable general equilibrium (CGE) models (TSA:RMF, 2008). We assess the potential for analysis of this nature in section 4. The TSA:RMF (2008) make it clear that there is no obligation for nations to produce Tourism Satellite Accounts but argues that such developments are an important step in a process that aims to further develop and integrate tourism statistics within the national accounting system of a country. The key elements of a Tourism Satellite Account have been highlighted here but it is recognised that this is not an exhaustive treatment of a complex and substantial set of guidance on the subject from the UNWTO. Readers are directed towards the TSA:RMF 2008 for a complete description of the TSA process. In the next section of this report we examine the key issues involved in compiling the tables included in this UK-TSA for 2008. Office for National Statistics 11

3. The UK-TSA for 2008 In this section we summarise the output of the UK-TSA in terms of the development of Tables 1-7 of the TSA. The principle outputs from each of the tables are highlighted here before more detailed commentary on the methodology employed in constructing the tables is presented in section four of this report. All of the TSA Tables that we refer to in this section can be found in Annex A of this report. 3.1 Table One: Inbound Tourism Expenditure Table One of the TSA gives details of spend by overseas visitors to the UK. The headline source for such data is the International Passenger Survey (IPS), a continuous survey carried out by the Office for National Statistics (ONS) which also provides information about visits abroad by UK residents (see TSA Tables Two and Three). The results of the IPS are based on face-to-face interviews with a random sample of passengers as they enter or leave the UK by the principal air, sea and tunnel routes. Inbound tourism statistics summarise the responses of overseas visitors as they leave the UK at the end of their visits. Data from the IPS are presented, with commentary, in the annual ONS Travel Trends publication. In 2008, total expenditure by overseas visitors to the UK was about 16.3 billion (only about 1 per cent of which was by day visitors). This is the total used in TSA Table One but, because the IPS does not ask respondents to provide a detailed breakdown of their expenditure, other sources are necessary to produce the table to the required detail. ONS produces detailed estimates of national product, income and expenditure for the UK which are included in the annual Blue Book. Consistent with these estimates and also released annually are Supply and Use Tables (SUTs) and these include a breakdown of non-resident household expenditure in the UK into 123 products. Although this breakdown also includes information about the spending patterns of, for example, foreign embassy staff and US service personnel, the majority of the information relates to overseas tourists so we have used the data to estimate proportions of spend in the IPS. According to the SUTs, over 40 per cent of expenditure by non-residents in 2008 related to one of the 123 products, hotels, catering and pubs, while another 45 per cent was on non-tourism products. Products within the SUTs can be combined so that they match the internationally agreed classification of tourism products. However, we were required to undertake further analysis of products in the SUTs that are the equivalent of more than one tourism product (e.g. hotels, catering and pubs). The SUT household final consumption expenditure table includes splits by combination of product and industry and, although this is not available for overseas visitors alone, we have assumed that their expenditure has a similar breakdown to the population as a whole. This allowed us to subdivide the proportion of inbound visitor expenditure for renting of machinery into vehicle rental and equipment for recreation and to identify the proportion of other services that relates to recreational services. Office for National Statistics 12

We have also used results from the 2008 UK Tourism Survey (UKTS) to split the proportion of spend on hotels, catering and pubs into the two TSA product groups of accommodation services for visitors and food and beverage serving. Similarly, an analysis of the 2005 English Leisure Visits Survey (ELVS) has been used to subdivide recreational services into cultural activities and sport & recreational activities and to identify a proportion of other spend linked to these activities. We have also used the UKTS to produce estimates of proportions of expenditure on travel agencies and conferences, exhibitions etc. The use of these two surveys assumes that patterns of expenditure by visitors from overseas are similar to that of their domestic counterparts. Further detail about them is included in the sections of this document relating to Table Two of the TSA. The result of using the processes described above is the estimated expenditure data in Table One in the Annex. These estimates are charted in Figure 3.1 below. Figure 3.1 Inbound tourism expenditure in the UK by product 2008 Accommodation services for visitors Food and beverage serving Rail passenger transport Road passenger transport Water passenger transport Air passenger transport Transport equipment rental Travel agencies & other reservation services Cultural services Sport and recreation services Exhibitions & Conferences etc. expenditure ( millions) 0 1,000 2,000 3,000 4,000 Other products - cultural, sport & rec. related Operation of personal transport Clothes Other goods and services Sources: ONS International Passenger Survey 2008, ONS Supply Use Table 3, UK Tourism Survey 2008, English Leisure Visits Survey 2005 3.2 Table Two: Domestic Tourism Expenditure Domestic Trips Overnight Visitors Table Two of the TSA (in Annex A) is a comprehensive summary of tourism spend by UK residents within the UK and includes information about domestic tourists (who spend at least one night in a destination), domestic excursionists (day visitors) and expenditure within the UK on outbound (overseas) trips. Office for National Statistics 13

For domestic overnight visitors, the main source of statistical information is the UK Tourism Survey (UKTS), a continuous face-to-face interview survey commissioned jointly by national tourist boards within the UK. The headline results are published annually in the UK Tourist and include estimates of total expenditure broken down by purpose, destination and other characteristics of trips. Total expenditure in 2008 was approximately 21.1 billion but the published data do not include information about expenditure on specific products so further analysis was necessary to produce the detail required for the TSA. As a basis for our development of this section of TSA Table Two, we have used a Visit England analysis of UKTS data that provided the summary breakdown of expenditure. However, to subdivide non-accommodation products so that they match those in the TSA we used proportions derived from a subset of results from the 2005 English Leisure Visits Survey (ELVS). Specifically, we used data from respondents who were undertaking day visits from a holiday base rather than those who travelled to and from their own homes (we also analysed visits en-route to and from a holiday base). Using these data to calculate proportions of expenditure of overnight visitors makes the assumption that spending patterns of UK visitors of this type in 2008 match those of the equivalent visitors in England three years earlier. As the travel data by mode that we used from the ELVS related only to transport while at a destination for overnight visits, we compared this with the UKTS total travel costs to produce an overall breakdown of travel expenditure by mode. This, together with the ELVS-based calculation of a breakdown of the UKTS s entertainment expenditure and allocation of a proportion of spend to conferences and exhibitions, resulted in the first data column of Table Two of the TSA, which is charted in Figure 3.2 below. Figure 3.2 Domestic overnight visitors tourism expenditure in the UK by product 2008 expenditure ( millions) 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Accommodation services for visitors Food and beverage serving Rail passenger transport Road passenger transport Water passenger transport Air passenger transport Transport equipment rental Travel agencies & other reservation services Cultural services Sport and recreation services Exhibitions & Conferences etc. Other products - cultural, sport & rec. related Operation of personal transport Clothes Other goods and services Sources: UK Tourism Survey 2008, English Leisure Visits Survey 2005 Office for National Statistics 14

Domestic Trips Excursionists For domestic excursionists, the main source of statistical information we have used is the 2005 English Leisure Visits Survey (ELVS), a telephone survey of adults in England spread evenly throughout the February 2005-February 2006 period. The data relate to Tourism Visits, which are defined as round trips starting from and returning to home for leisure purposes and which last three hours or more and are not taken regularly. Hence, Tourism Visits are a sub-set of Leisure Visits. Although the activity and item breakdown in the published ELVS expenditure estimates do not match those of the TSA, further analysis of the data produces the relevant splits of expenditure. However, there are other issues with the source as the ELVS covers England only and has not been repeated since 2005. We have used results from the 2002/03 Great Britain Leisure Visit Survey (GBLVS) to convert the England only data to estimates for Great Britain (GB) as a whole. This assumes that the multipliers apply fairly equally to all tourism industries and that the proportion of GB visits that took place in England (about 87 per cent) was the same in 2005 as in the earlier survey. To convert 2005 data to the 2008 equivalent we have used multipliers based on the year on year in the annual Household Final Consumption Expenditure (HHFCE) data for each tourism product. To produce a UK estimate, we have added data from the 2003 Northern Ireland Tourism Satellite Account (TSA) which also has been updated to 2008 using HHFCE based multipliers. Overall, the process described above has resulted in a total estimated spend by domestic day visitors in the UK of 48.3 billion. This is detailed in the second data column of Table Two, charted in Figure 3.3 below. Figure 3.3 Domestic excursionists tourism expenditure in the UK by product 2008 Accommodation services for visitors Food and beverage serving Rail passenger transport Road passenger transport Water passenger transport Air passenger transport Transport equipment rental Travel agencies & other reservation services Cultural services Sport and recreation services Exhibitions & Conferences etc. expenditure ( millions) 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Other products - cultural, sport & rec. related Operation of personal transport Clothes Other goods and services Sources: English Leisure Visits Survey 2005, Household Final Consumption Expenditure 2005-2008, GB Leisure Visits Survey 2002/03, Northern Ireland Tourism satellite accounts 2003 Office for National Statistics 15

Domestic Tourism Expenditure: Outbound Trips The central section of data in Table Two of the TSA includes estimates of expenditure within the UK that relate to overseas visits. The first of the two main sources that we have used is the ONS International Passenger Survey (IPS), and, in particular, information about spend on fares and travel agency and similar services. We have assumed that 15 per cent of spend on overseas package holidays is commission and, therefore, used this figure for outbound data. For expenditure on fares, we have used all IPS data, not making any distinction between expenditure paid to UK-based carriers (57 per cent of the total) and that paid to those overseas. This ensures consistency with supply data, as our final calculation of tourism ratios includes imports as a contributor to the denominator for each product. There is no regular survey of spend at and en-route to departure points for overseas visits so we have used data from a 2005 Morgan Stanley report of expenditure at airports. We have again used HHFCE based multipliers to produce 2008 estimates from these earlier figures. We have also used IPS data on the number of visits by mode to estimate spend at departure points other than airports, assuming that the pattern is similar to that at airports. As TSA Table Two and Figure 3.4 illustrate, expenditure within the UK on overseas trips in 2008 was about 26.9 billion most of which (59 per cent) related to air passenger transport services. Figure 3.4 Domestic outbound tourism expenditure in the UK by product 2008 Accommodation services for visitors Food and beverage serving Rail passenger transport Road passenger transport Water passenger transport Air passenger transport Transport equipment rental Travel agencies & other reservation services Cultural services Sport and recreation services Exhibitions & Conferences etc. expenditure ( millions) 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Other products - cultural, sport & rec. related Operation of personal transport Clothes Other goods and services Sources: International Passenger Survey 2008, Morgan Stanley survey of airport spend 2005, Household Final Consumption Expenditure 2005-2008 3.3 Table Three: Outbound Tourism Expenditure: Non-Domestic Table Three of the TSA gives details of expenditure overseas by domestic outbound tourists. Unlike the data in Tables One and Two, the estimates in this table do not feed into other TSA tables and, therefore, it effectively stands alone. Office for National Statistics 16

As with Table One, the headline data source is the International Passenger Survey (IPS). Outbound tourism statistics summarise the responses of UK travellers as they return to the country at the end of their visits overseas. According to the ONS Travel Trends summary of the IPS, total expenditure of UK residents on overseas visits was approximately 36.8 billion, less than 1 per cent of which was by day visitors. This total is converted to the breakdown by product in TSA Table Three by using a similar process to the creation of Table One. We have used the annual Supply and Use Tables (SUTs) in the production of Table Three (as was the case with inbound tourism expenditure data). The SUTs include a breakdown of UK resident household expenditure abroad into 123 products and, as for table one, we have combined this information with other data from the SUTs, the 2008 UK Tourism Survey (UKTS) and the 2005 English Leisure Visits Survey (ELVS) to provide a product breakdown that matches that of the TSA. The data in the SUTs relate to household expenditure by all UK residents abroad. This includes embassy staff and other non-travellers but excludes business travellers, some of whom were included in IPS results. We have assumed that the extensive overlap between the groups of people in the two data sources indicates that spending patterns are similar. Also, the use of the other surveys mentioned above assumes that patterns of expenditure by domestic visitors overseas are similar to that of domestic visitors within the UK. The results of using the processes described above are the expenditure estimates in Table Three in the Annex which are charted in Figure 3.5 below. Figure 3.5 Non - domestic outbound tourism expenditure in the UK by product 2008 expenditure ( millions) 0 2,000 4,000 6,000 8,000 10,000 Accommodation services for visitors Food and beverage serving Rail passenger transport Road passenger transport Water passenger transport Air passenger transport Transport equipment rental Travel agencies & other reservation services Cultural services Sport and recreation services Exhibitions & Conferences etc. Other products - cultural, sport & rec. related Operation of personal transport Clothes Other goods and services Sources: International Passenger Survey 2008, ONS SU Table 3, UK Tourism Survey 2008, English Leisure Visits Survey 2005 Office for National Statistics 17

3.4 Table Four: Domestic Tourism Final Consumption Table Four of the TSA is a summary of the estimated total expenditure on tourism within the UK. It combines the data from tables one and two with an estimate of spending relating to the maintenance and upkeep of second homes to produce a total estimate of internal tourism consumption of 113.7 billion in 2008. The second homes data are based on information from the ONS publication Family Spending which suggests that the running costs of second homes equates to around 0.8 per cent of such spend on all homes. Table Four and Figure 3.6 both illustrate the breakdown of total expenditure on internal tourism consumption by product. Figure 3.6 Internal tourism consumption by product 2008 Accommodation services excluding the below Related to holiday home ow nership Food and beverage serving Rail passenger transport Road passenger transport Water passenger transport Air passenger transport Transport equipment rental Travel agencies & other reservation services Cultural services Sport and recreation services Exhibitions & Conferences etc. Other products - cultural, sport & rec. related Operation of personal transport Clothes Other goods and services expenditure ( millions) 0 5,000 10,000 15,000 20,000 Sources: as in Figures 3.1 to 3.5, ONS Family Spending 3.5 Table Five: Production of Tourism Commodities TSA Table Five reports on the output and GVA of the tourism characteristic industries. The totals for each industry coincide with ONS Supply and Use Tables (SUT), although this requires that we extract the non-tourism industries using the ONS Annual Business Inquiry (ABI). This is achieved by calculating output and GVA shares at a 5-digit SIC03 2 industry level. To reconcile the output of industries to the output of products requires a Make Matrix (MM). This is essentially a detailed supply table, showing the value of products produced by each industry. It is largely diagonal, so that products are mainly produced by their corresponding industry. Nonetheless, there are some off-diagonal elements to it. ONS supplies an MM for internal use only due to its disclosive nature. However, the results that we derive from the MM are not disclosive and can, therefore, be reported here. 2 Industries have to be considered in SIC03 here as the SUT tables are complied using SIC03 classifications. Fortunately, the ABI provides a conversion between SIC03 and SIC07 so that the tourism industries can be considered in terms of SIC03. Office for National Statistics 18

Table Five is essentially a tourism-specific MM, with information on intermediate consumption and GVA. Values in the rows indicate how much of a certain product is produced by each industry. Values in the column show how much of each product a certain industry produces. To see how this works, we will show a couple of examples based on the figures reported in Table 5. First, by row, the majority of transport equipment rental products, almost 6 billion worth, is produced by the transport equipment rental industry column. However, other tourism and non-tourism industries contribute to the output of these products. For example, the restaurant and travel agency industries produce 244 million and 199 million worth respectively. Similarly, the air passenger transport industry column produces the majority, almost 18 billion worth, of air passenger transport services. However, this industry also produces just over half a billion pounds worth of other goods and services, for instance accommodation and food and beverage services. So, to summarise, Table 5 highlights the fact that industries not only produce their own goods and services, but others relating to other activities. Table Five displays the extent of this activity. However, a common drawback of both the SUT and MM is that their classification system is not perfectly suited to tourism analysis. For instance, accommodation and restaurant industries are reported together under Hotels, catering and pubs. Furthermore, the transport industries are comprised of both passenger and freight activities. As mentioned earlier, the ABI is used to estimate output and GVA of the tourism industries, using the SUT. To alleviate the classification problems associated with the MM we use the ONS Annual Population Survey (APS). It provides data on occupation by industry, so that it is possible to calculate the proportion of certain types of worker each industry employs. For instance, it is possible to estimate the proportion of hotel porters that work in food and beverage serving industries. This allows us to estimate accommodation services produced as a proportion of total restaurant industry output, by assuming that industry-specific workers such as hotel porters only make industry-specific products, in this case accommodation products for visitors. Travel agencies Estimating the output of travel agency products and services is a particular problem area in compiling this TSA. According to the TSA:RMF 2008, the output of these services should be measured net of all purchases used in the repackaging of their bundled product. These purchases are normally for items such as flights, and accommodation. However, the estimate of output and intermediate consumption of these services using the SUT and ABI was large. We believe that most of this intermediate consumption consists of services for bundled travel agency services. However, currently we are unable to disentangle to what extent this is the case, as some of it will be for general operation of travel agents (e.g. stationery etc.). Therefore, we can t subtract all intermediate consumption from output to derive the TSA compliant output of travel agency services. To tackle the issue, we have assumed that travel agents earn around 15 per cent commission on the services they provide. Thus, they earn 15 per cent of value on top of the items they purchase to make their products. Therefore, we took 15 per cent of the value of domestic output travel agency services, as calculated using the same method of other goods and services using the MM and SUT. The remaining 85 per cent is an estimate of the value of the services purchased to make the product. So, the 15 per cent is purely the value added from re-bundling services to make travel Office for National Statistics 19