i Structural Tourism in the Northern Ireland Economy Volume 1 March 2007
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Headlines Θ The total income generated by Tourism in 2003 was worth some 3.5 per cent of Gross Value Added (GVA) or 783 million to the Northern Ireland economy when assessed according to internationally recognised standards. Θ However, only about a quarter of this was due to visitors from outside Northern Ireland (0.9% of GVA or 199 mn) with the rest being accounted for by Northern Ireland residents on day visits ( 406 mn), overnight stays ( 82 mn), owning holiday homes ( 19 mn) or spending money in NI in connection with outward travel ( 77 mn). Θ External visitors' contribution to the Northern Ireland economy (0.9 per cent of GVA) is the lowest of the countries of the UK or Ireland. Θ In total, some 36 700 jobs are supported by resident and non resident tourism activity (28 700 Full Time Equivalent) with about one quarter of these accounted for by out of state visitors. Θ Direct value added from tourism ( 423 mn, which excludes the supply chain and indirect spending) is 1.9 per cent of total Northern Ireland GVA. This amount is about four-fifths of the GVA arising from the Agriculture sector in Northern Ireland ( 575 mn) in 2003 reflecting a similar importance to the economy. Θ The unfulfilled potential of the tourism industry in Northern Ireland reflects the fact that it lost some three quarters of its global market share of incoming visitors at the start of the Troubles. It currently gains barely a fifth of the out of state visitors to the island of Ireland, whereas before the Troubles it reached almost two fifths of all-island inbound tourism. Θ The research also indicates we have between 5-7 per cent of the non resident holiday visitors and half of the business visitors from Great Britain that a country of Northern Ireland's size and economy would warrant. There is also significant potential to attract visitors from the Republic of Ireland. Θ Since the mid 1970s, tourism has nevertheless grown, following the global trend to increased travel and leisure, and has contributed about 8 per cent of the total real economic growth of Northern Ireland. Θ Nevertheless, if Northern Ireland had matched external visitor trends in the Republic of Ireland since 1969, tourism income (GVA) from this source would be expected to be worth an additional 270 million in 2006, or more than 11 000 jobs. The extra sales to generate this would be of the order of 400 mn. Θ In order to regain this share it would need to grow in real terms at 14 per cent per year over the next 10 years or 9 per cent over the next 20 years. In contrast, average growth in external tourism spending has been 3.6 per cent in real terms over the last 5 years. Θ How fast Northern Ireland returns to its true market share potential will be due in large part to the quality of the tourism product on offer. World class attractions and accommodation will be necessary to increase holiday visits by non-residents and this in turn is likely to require considerable investment to achieve the accelerated growth necessary. Θ While leisure day visits by Northern Ireland residents have traditionally not been considered an integral part of tourism it is clear they have an important role to play in sustaining the vitality of the tourism industry and in making Northern Ireland a more attractive place to live and work. 3
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Table of Contents TABLE OF FIGURES...7 INTRODUCTION...9 EXECUTIVE SUMMARY: TOURISM IN THE NORTHERN IRELAND ECONOMY...12 POTENTIAL FOR GIANT STEPS: THE ROLE OF TOURISM IN THE NORTHERN IRELAND ECONOMY EXECUTIVE OUTLINE...13 The market and demand...15 Inbound tourism...15 Day visits...16 What tourists demand...16 Business and economics...18 Tourism industries...18 Growth...18 The supply chain...19 Methods & further details...20 Data sources...20 Tourism satellite accounts...20 Social accounts and input-output tables for Northern Ireland...21 Find out more...21 MEASURING TOURISM: A NEW APPROACH...24 Tourism Satellite Accounts...24 PART ONE: THE TOURISM MARKET IN NORTHERN IRELAND, TOURISM SPENDING AND MARKET SHARES...26 1. THE MARKET OVERALL...27 2. INBOUND VISITOR SPENDING...28 Global market perspective...29 Northern Ireland tourism in a time perspective...32 Comparisons with elsewhere...33 Spending by type of purchase...35 Transport...37 Three main inputs from outside...37 3. SPENDING ON TOURISM IN NORTHERN IRELAND BY NORTHERN IRELAND RESIDENTS...41 Patterns of spending...43 Second homes...43 4. OUTBOUND TOURISTS...44 5
PART TWO: SUPPLYING TOURISTS AND THE TOURISM INDUSTRY IN NORTHERN IRELAND... 46 5. CONTEXT: THE GROWTH AND STRUCTURE OF THE NORTHERN IRELAND ECONOMY48 6. INDUSTRIES TOURISM SALES, VALUE ADDED AND EMPLOYMENT...53 Imports...54 Demand on NI industries...55 Hospitality industries...56 7. GVA COMPARISONS...61 8. COMPARISONS OVER TIME...62 9. DIRECT GVA COMPARISONS ACROSS REGIONS...64 10.SUPPLY CHAINS, MULTIPLIER EFFECTS AND THE WIDER ECONOMIC IMPACTS...66 11.DIRECT EMPLOYMENT...69 PART THREE: DEVELOPING TOURISM: SOME OPTIONS SUGGESTED BY THE STATISTICS...72 12. RETURNS TO TOURISM INVESTMENT AND DEVELOPMENT...73 Example 1 Conference Complex...73 Example 2 Short break promotional advertising...75 PART FOUR: TOURISM SATELLITE ACCOUNTS...79 TSA Table 1: Inbound tourism consumption, by products and categories of visitors...81 TSA Table 2: Domestic tourism consumption, by products and categories of visitors...82 TSA Table 3: Outbound tourism consumption, by products and categories of visitor...83 TSA Table 4: Internal tourism consumption, by products and type of tourism...84 TSA Table 5: Production accounts of tourism industries and other industries...85 TSA Table 6: Domestic supply and tourism consumption, by products.87 TSA Table 7: Employment in tourism industries...88 TSA Table 10: Non-monetary indicators...89 13. REFERENCES...90 14. TERMS OF REFERENCE...93 6
Table of Figures FIGURE 1 MARKET OVERVIEW...27 FIGURE 2 COMPOSITION OF INBOUND TOURISM SPEND...28 FIGURE 3 REAL INBOUND TOURISM SPENDING IN NI 1959-2005...29 FIGURE 4 GLOBAL INTERNATIONAL TOURIST ARRIVALS, VISITORS BY CONTINENT...29 FIGURE 5 INDEX OF INTERNATIONAL TOURISM SPENDING 1950-2005...30 FIGURE 6 NI SHARE OF GLOBAL INTERNATIONAL TOURISM 1959-2005...32 FIGURE 7 SHARE OF OVERSEAS VISITORS TO IRELAND 1960-2004...33 FIGURE 8 COMPARISON OF NI AND ROI OUT OF STATE VISITOR NOS 1960-2005...34 FIGURE 9 PURCHASES OF INBOUND TOURISTS...35 FIGURE 10 DAILY PURCHASES OF INBOUND VISITORS BY PURPOSE OF TRIP...36 FIGURE 11 TRANSPORT MODES REPORTED BY VISITORS AND ESTIMATED SPENDING...37 FIGURE 12 SKYSCRAPER DIAGRAM OF INBOUND SPENDING BY PURPOSE & PURCHASE...38 FIGURE 13 INBOUND VISITORS ACCOMMODATION SPENDING BY VISIT PURPOSE...38 FIGURE 14 INBOUND VISITORS ENTERTAINMENT SPENDING BY VISIT PURPOSE...39 FIGURE 15 INTERNATIONAL CONNECTIONS FROM BELFAST AIRPORTS...40 FIGURE 16 NI RESIDENTS SPENDING IN NI BY VISIT TYPE...41 FIGURE 17 NI RESIDENTS TOURISM SPENDING IN NI BY PURCHASE...43 FIGURE 18 VALUE FLOWS IN NI TOURISM...47 FIGURE 19 NORTHERN IRELAND REAL GVA 1967-2004...48 FIGURE 20 THE COMPOSITION OF GVA 1971-2003...49 FIGURE 21 COMPOSITION OF UK/NI GVA 2003: 30 INDUSTRIES...50 FIGURE 22 UK REGIONS HOUSEHOLD INCOME PER HEAD OF POPULATION, 2003...52 FIGURE 23 PRODUCT PATTERN OF TOURIST PURCHASES...53 FIGURE 24 IMPORTS TO MEET TOURISM DEMAND...54 FIGURE 25 TOURISM DEMAND ON NI INDUSTRIES...55 FIGURE 26 COST STRUCTURES IN NI HOSPITALITY INDUSTRIES...56 FIGURE 27 HOSPITALITY SECTOR REAL GVA GROWTH...57 FIGURE 28 GROWTH IN ACCOMMODATION CAPACITY...57 FIGURE 29 EMPLOYEES IN THE HOSPITALITY INDUSTRIES...58 FIGURE 30 SOURCES OF BUSINESS FOR THE HOSPITALITY SECTOR...59 FIGURE 31 RATIO OF OVERNIGHT VISITOR SPEND TO HOSPITALITY GVA 1972-2004...60 FIGURE 32 COMPOSITION OF NI GVA 2003...61 FIGURE 33 HOSPITALITY GVA AS % OF TOTAL GVA: UK AND NI 1971-2004...62 FIGURE 34 HOSPITALITY GVA %GE NI, UK, SCOTLAND AND ROI...63 FIGURE 35 TOURISM DIRECT GVA AS % OF TOTAL UK REGIONS AND ROI 2003...64 FIGURE 36 TOURISM VS HOSPITALITY GVA UK REGIONS AND ROI...65 FIGURE 37 B2B SUPPLY CHAIN FOR TOURIST SPENDING...66 FIGURE 38 JOB CREATION RATIOS...67 FIGURE 39 INDUSTRIES IN THE SUPPLY CHAIN...68 FIGURE 40 REAL GVA PER JOB IN HOSPITALITY INDUSTRIES, 1971-2004, UK AND NI...69 FIGURE 41 VALUE FLOWS IN NI TOURISM...70 FIGURE 42 ASSUMED EXPENDITURE PATTERN CONFERENCE VISITORS...74 FIGURE 43 JOB CREATION FROM A SUCCESSFUL ADVERTISING CAMPAIGN...77 7
Table of Tables TABLE 1 SPLIT BY PURPOSE: UK, SCOTLAND AND NI VISITS...34 TABLE 2 TOURISM MULTIPLIERS...67 TABLE 3 DIRECT JOBS SUPPORTED BY TOURISM...69 TABLE 4 IMPACT OF STIMULATING OVERNIGHT TOURISM...76 NOTE: THE NUMBERING SYSTEM FOR THE TSA TABLES IS STIPULATED IN THE RECOMMENDED METHODOLOGICAL FRAMEWORK. WE HAVE NOT PRODUCED TSA TABLES 8 (INVESTMENT) AND 9 (GOVERNMENT CONSUMPTION) IN THIS PROJECT. 8
Introduction The purpose of this report is to set out the current economic role of tourism in the Northern Ireland economy and in particular to estimate the economic impact of tourism in terms of its wider contribution to the economy, using methods of measurement that are consistent with best international practice. This report is intended to be of use both to those with an interest in and concern for the economy of Northern Ireland and to those with an interest in the development of tourism. This introduction is followed by an executive summary and a short note on the new international methods used for measuring tourism, the Tourism Satellite Account, TSA, tied to the system of national accounts. Thereafter the report falls into three parts: The first part is concerned with the size of the market and with spending by tourists. It discusses the present market size, the past evolution, and the detailed make-up of major market segments, where segments are defined by the origin of the tourist and the purpose of the visit. Part of the necessary background is the world tourism market, whose rapid growth has been driven by increases in affluence and reductions in transport costs. There has been a shift in products consumed and UK suppliers have progressively achieved a smaller share of the rapidly growing market. In Northern Ireland s case one of the special factors considered is the impact of the Troubles on market share, almost 40 years ago. The new measurement methods significantly change the way in which the supply of tourism goods and services is analysed, which the second part of the report addresses. It deals with the supply side of the industry, looking at the hospitality industries including accommodation, restaurants and bars, transport, the travel trade and attractions. For each of these segments the importance of tourist as opposed to nontourist demand is examined, in order to form a view of the structure, conduct and performance of the producers. To set this in perspective there is discussion of the historical development of the Northern Ireland economy since the late 1960s, and its current structure, drawing on comparisons with the rest of the United Kingdom. The report then goes on to consider the supply chain for tourism and other aspects of its wider economic impact, and illustrates the possible impact (and therefore return on investment) from some tourism development projects. Crucial steps in managing tourism 9
The third part of the report deals with issues which have arisen out of the economic and statistical analysis, including closer examination of the market potential to recover, the orientation of tourism provision and its integration with culture and leisure in the domestics market, and the role of the public sector in addressing current and historic market failures. The report concludes with a formal set of Tourism Satellite Accounts. Two further reports are being issued in conjunction with the present one: a more detailed statistical description of the Tourism Satellite Accounts and the methods used to construct them, and a set of Social Accounts and Input-output Tables for Northern Ireland. It was necessary to construct the latter in order to develop the TSAs, but this was a large undertaking with applications far beyond the realm of tourism, so they merit separate publication. The majority of the work was undertaken during 2006, when the latest data available to create an adequately detailed picture of the entire Northern Ireland economy covered 2003, so 2003 was taken as the reference year. 10
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Executive Summary: Tourism in the Northern Ireland Economy 12
Potential for Giant Steps: the role of tourism in the Northern Ireland economy executive outline A new study commissioned by the Department for Enterprise Trade and Investment and the Northern Ireland Tourist Board applies the latest international methods to trace the role of tourism through the economy of Northern Ireland. It concludes that Northern Ireland lost three quarters of its international market share in tourism at the start of the Troubles, and that under-investment over nearly forty years has left the industry with only a fraction of its potential capacity, particularly when it comes to holidaymakers and business visitors. The demand on NI tourism industries from Northern Ireland s own people has grown, while switching from local overnight stays to day trips, a trend which has also occurred in other places. The consequence is that the prosperity of hospitality and other tourism industries hinges critically on the day visitor; and also that efforts to improve the tourism offering are likely to have an impact on the general quality of life for everyone in Northern Ireland. The legacy of the Troubles means that despite substantial natural advantages, Northern Ireland s tourism industry is smaller in relation to its economy than any other region or country in the UK. There is an opportunity for a substantial step upwards in tourism Gross Value Added as potential visitors increasingly realise that peace has returned. The total spent by tourists in Northern Ireland in 2003 (the latest possible base year for the study) was 1278 mn. Of this total about one quarter was spent by incoming visitors from out of state, representing exports for Northern Ireland. The largest category of within state spending was day tourists (people away from home for at least three hours), with the remainder made up of people from Northern Ireland staying at least one night outside their usual environment, and outbound tourists going somewhere else, but spending money on their way or in anticipation of their trip. Tourism spending of 1278 mn - the overall picture Domestic overnight tourists 10% Domestic spending of outbound tourist 8% Second homes in NI 2% Out of state same-day visitors 2% Out of state visitors to friends and relations 9% Out of state holiday visitors 3% Domestic same-day leisure visitors 56% Out of state business visitors 9% Other out of state visitors 1% Source: NITSA Ref P195 /2003/nitsa42003/ch1 Tourism spending helps to support a wide range of industries. Most of the goods that tourists buy directly are imported, but almost all the services are domestically produced. The Gross Value Added in industries that directly supply tourists is 1.9 per 13
cent of the Northern Ireland total, lower than any other part of the UK and significantly below the Republic of Ireland figure of 3.4 per cent. If we count the supply chain and the impact of tourism and related employees spending their incomes, the proportion of GVA rises to 3.5 per cent. The diversity of services that tourists use and the depth of the supply chain means that there are many sophisticated linkages between the tourism economy and the rest of the economy, with the supply chain including not only services but some of Northern Ireland s competitive goods-producing industries including agriculture, food and tobacco. Northern Ireland must take giant steps to regain its historic market share Northern Ireland is only the second part of the UK (after Scotland) to publish its tourism performance in a full set of Tourism Satellite Accounts. TSAs are a new internationally agreed framework designed to allow tourism to be looked at alongside other industries in the economy for the purposes of strategies for business or policies for public bodies. 14
The market and demand Inbound tourism The level of spending by incoming visitors has grown rapidly, by more than 5 per cent per year in real terms since 1975. This is almost twice as fast as the Northern Ireland economy as a whole and comparable with the growth of the international tourism market. Much more may be possible. At the start of the Troubles Northern Ireland lost three quarters of its international market share of incoming visitors and slipped back to gaining barely a fifth of the out-of-state visitors to the island of Ireland, from a previous peak level of almost two fifths. NI share of out-of-state visitors to the island of Ireland 40% 35% 30% 25% 20% 15% Source: NITB and Failte Ireland Ref: P195/social trends/ch3 10% 5% 0% 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Comparisons with other places indicate that while Northern Ireland may be gaining close to its share of visitors to friends and relatives, it has a significantly smaller number of business visitors than the size of country and its business community might normally generate, and only a small fraction of the holiday trade. 15
Day visits Day visits within Northern Ireland are now considered statistically part of tourism because they fall within the international definition, and because day visitors are fundamental to the business viability of the tourism industry. No of tourism day visits per resident 30 25 Countryside Seaside/coast Town/city 20 15 10 5 Source: GB Leisure Day Visit Survey 2002-3 and cogentsi estimates Ref: Ref: Z/industries/TTT /Tourism/ origins of LDV/novisits 0 North East North West Yorks/ Humb East Midlands West Midlands East of England London South East South West Wales Scotland NI In fact the total value of leisure day visits is estimated at 1.7 bn or 10 per cent of all household consumption, but to enable comparison with English regions visits of less than three hours, totalling 1 bn, have been excluded. Even the 712 mn that remains is 56 per cent of tourism spending. In a year the average resident is estimated to take 16 of these longer day visits. Domestic day visits have not been a primary focus of activity or expenditure by the NITB up to now. What tourists demand The pattern of spending supports traditional visitor stereotypes: visitors to friends and relatives stimulate their hosts into going out and about. They therefore account for the majority of spending on entertainment and at attractions, while holidaymakers spend diversely across Northern Ireland. Business visitors are least constrained in overall spending and typically spend far more on accommodation. This means that the bulk of 82.4 mn spent on accommodation by inbound visitors currently comes from business visitors: 16
Accommodation spend by visit category, 000 82 400 13 880, 17% Same-day visitors 5 200, 6% 5 260, 6% VFR Holiday Business Other 58 060, 71% Source: NITSA estimates Ref z:/p195/nitsa12003new/viscat ie2 The amount spent on entertainment and visitor attractions is less than at many tourist destinations. This is partly because of the low numbers of holidaymakers, and the fact that some of the most powerful attractions are available to all free of charge, but also because investment in tourism infrastructure has been low. Overall the mix of products supplied to tourists is extremely diverse, a little more than half being characteristically tourist and the rest covering almost the whole range of personal purchased. Products supplied directly to tourists in Northern Ireland Telecommunications, 17 413 Knitted goods, 16 051 Recreational services, Clothing, 55 318 73 935 Car hire 17 319 Footwear, 11 874 Second homes, 19 716 Banking and finance, 15 859 Travel agencies &c, 61 714 Other land transport, 19 971 Railway transport, 8 326 Motor trade, 21 549 Petrol & diesel, 30 998 Wholesale trade, 40 842 Slices broken out are 'tourism characteristic industries' in the Tourism Satellite Accounts Retail trade, 127 575 Hotels etc, 108 476 Restaurants bars, 363 161 Source NITSA Ref P195 impact totspend ch2 Hotels, catering, pubs etc, 471 638 Figures show direct sales to tourists in 000 at basic prices (Gross Margins for the distributive trades) Note that most food and drink purchases are not sold directly but via the hospitality industries. Main chart total is 1108mn ( 1278 mn total spending less 170mn in sales taxes). 17
Business and economics Tourism industries While other industries are defined in terms of what processes the supplier is engaged in, the tourism industry is defined in terms of the circumstances of the customers: are they inside or outside their normal environment? The tourism industry is therefore a collection of parts of other industries. It contributes, for example, about 39 per cent of the total sales income of the accommodation (hotels etc) industry and about 35 per cent of restaurants and bars. These numbers are obtained by carefully balancing supply and demand in the tourism satellite accounts. It also contributes in Northern Ireland about 23 per cent of sales of the passenger transport industry and 3 per cent of gross margins of the retail industry. Most goods purchased by tourists (as, indeed, most goods purchased by anybody in Northern Ireland) are imported, but most services are produced here. After deducting 170 mn for VAT and excise duty, and 253 mn for imports, total purchases of the products of NI industries are 855 mn. Using the fine industrial detail of the Northern Ireland Social Accounts and Inputoutput Tables we can estimate the value added generated by these sales and the employment (and self employment) supported. Value added is 423 mn, about 1.9 per cent of the Northern Ireland total. This is the lowest percentage in the UK, and significantly below the 3.5 per cent estimated for the Republic of Ireland. The number of direct jobs is 24 200. Tourism GVA as %ge of regional total 4.5% 4.0% 3.5% 3.0% 2.5% Source: estimates and updating based on First Steps projects Ref industry/ttt/ukgva% 2.0% 1.5% 1.0% 0.5% 0.0% United Kingdom (est) Northern Ireland North East North West Yorkshire and Humber East Midlands West Midlands East of England London South East South West Scotland (est) Wales (est) Republic of Ireland (est) But although small in terms of comparison with other places, Northern Ireland tourism is larger in economic terms than any single manufacturing sector, except tobacco, and of comparable size to several service sectors and to agriculture. Growth And again, although still relatively smaller than other regions of the United Kingdom, the main tourist industries in Northern Ireland have been growing rapidly for 30 years 18
in both economic and physical terms. Since the mid 1970s tourism has driven about 8 per cent of the growth in the Northern Ireland economy. The number of beds, after being static below 10 000 through the 1970s and 1980s, has grown to 16 000 since the early 1990s. The number of people working in the hospitality industries has grown from less than 90 000 to more than 170 000 over thirty years, and hospitality gross value added in real terms has grown from 190 mn to more than 600 mn over the same period. Hotels, catering, pubs etc GVA as % total GVA 4.0% 3.5% 3.0% 2.5% United Kingdom Northern Ireland 2.0% 1.5% Source: DREAM Ref z/industries/ttt/ukgva%/h osp%3 1.0% 0.5% 0.0% 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 Most global forecasters expect a slowing of tourism growth in Europe over the next 20 years, but the untapped potential means that Northern Ireland s tourist industry need not slow down, and growth could even accelerate. The supply chain After allowing for indirect jobs (the supply chain) and induced jobs (resulting when wages and salaries earned in the industry are spent) the total tourism GVA is 3.5 per cent of total Northern Ireland GVA. 19
The business-to-business supply chain behind tourism 900000 800000 700000 000 600000 500000 400000 300000 other food drink transport wholesaling retailing hospitality 200000 100000 0 Direct Round2 Round3 Round4 Round5 Round6 remainder ref totspend/ch1 stages in the supply chain The industries in the supply chain are quite different to those that tourists directly interact with, spreading the influence of the industry through the economy. Methods & further details Data sources Tourism information has been gathered from a wide number of sources, including the UN World Tourism Organisation, the Northern Ireland Passenger Survey, the International Passenger Survey and UK Travel Survey of the Office for National Statistics, the GB Leisure Day Visit Survey and sources at Failte Ireland and the Central Statistics Office. Wider economic information came mainly from DETI and other Northern Ireland Departments, ONS and CSO. Tourism satellite accounts Measuring tourism is not an easy task because the industry is consumer-defined. Conventional industries are defined in terms of processes and activities or, for convenience, the products they produce. But there is no single tourist industry: many conventional industries serve the tourist, and tourism is defined as the activities of persons travelling to and staying in places outside their usual environment. Accordingly, international statistical agencies and the World Tourism Organisation have developed a new standard, Tourism Satellite Accounts which describe how tourism fits into a national economy measured by the standard System of National Accounts. The TSA method has now been adopted by more than 70 countries. It consists of a set of ten tables (although in Northern Ireland as in most other countries, only eight have so far been prepared): TSA Table 1: Inbound tourism consumption, by products and categories of visitors TSA Table 2: Domestic tourism consumption, by products and categories of visitors TSA Table 3: Outbound tourism consumption, by products and categories of visitor 20
TSA Table 4: Internal tourism consumption, by products and type of tourism TSA Table 5: Production accounts of tourism industries and other industries TSA Table 6: Domestic supply and tourism consumption, by products TSA Table 7: Employment in tourism industries TSA Table 10: Physical indicators of tourism TSA Tables 1-4 draw mainly on visitor surveys to present the demand side of tourism in a rigorous way and indicate the goods and services tourists purchase: some of these are characteristic of tourism but many are the same as goods that people buy in the normal course of life. TSA Table 5 in fact summarises production and supply patterns across the whole of Northern Ireland, but focuses attention on the industries producing tourism products. TSA Table 6 draws supply and demand together, showing how much of the activity of each industry is oriented to tourists, and TSA Table 7 applies this to the employment in each industry. As well as this main report, Volume 2 is to be published setting out in detail the sources and methods used. Social accounts and input-output tables for Northern Ireland To prepare TSA Table 5 and to provide a basis for comparison with other industries it was necessary to prepare a complete set of social accounts and input-output tables for Northern Ireland. This is the first time such a set of national accounts has been prepared in detail for Northern Ireland, and information from many of the business and household surveys conducted by the Executive was incorporated. The final tables make as much use as possible of these surveys, and are drawn up to be consistent with the UK s national and regional accounts and use the baseline work undertaken by the Office for National Statistics. As well as developing the accounts so that they are fit for purpose when it comes to measuring tourism, it has been decided to make them available as an exposure draft so that they can be used as the basis for other applications in other industries and in relation to other policy issues right across the economy. Find out more Volume 2 setting out technical details of data and calculations will be finalised in March 2007 and will be available from Northern Ireland Tourist Board St Anne's Court 59 North Street BELFAST BT1 1NB Tel +44 (0)28 9023 1221 or from the Department for Enterprise, Trade and Investment Netherleigh Massey Avenue BELFAST BT4 2JP Tel +44 (0)28 905 29475 Email:statistics@detini.gov.uk The Social Accounts and Input-output Tables are being issued by DETI and the Northern Ireland Statistics and Research Agency and are available from the same address. Two articles will appear in the Northern Ireland Economic Bulletin in June 2007 21
The reports were prepared by Cogent Strategies International Ltd, www.cogentsi.com, in response to the terms of reference reproduced in Section 14. The Steering Group consisted of representatives from DETI and NITB and the authors and the steering group would like to acknowledge assistance and helpful inputs from across business, government and academia in Northern Ireland, and from Great Britain and the Republic of Ireland. The calculations make use of cogentsi s DREAM Detailed Regional Economic Accounting Models of the United Kingdom and Republic of Ireland. 22
The tourism economy in a nutshell DEMAND Incoming day visitors to Northern Ireland spend and incoming overnight visitors Leisure day visitors within Northern Ireland on long trips spent an estimated and NI people staying away from home overnight within Northern Ireland spent 23 mn 284 mn 712 mn 133 mn NI residents' second homes have an annual value of 20 mn and outward-bound NI tourists' spending in NI is 105 mn Thus identifiable tourism expenditure in Northern Ireland totals 1278 mn SUPPLY Vat and duty of 170 mn is collected on this leaving a net figure for purchases within NI of Many goods and some services are imported 1108 mn 253 mn Leaving demand on NI producers of goods and services as 855 mn VALUE CHAIN The direct value added (GVA) in supplying these sales was The direct number of jobs (employee-jobs and self employed) was 423 mn 24200 of which the full-time equivalent is: 18000 The indirect sales, value added and jobs arising in Northern Ireland in the supply chain are 283 mn, 123mn and 4300(3800FTE) When people working directly and in the supply chain spend their incomes they induce sales, value added and employment of 470 mn, 236 mn and 8200(6700FTE) 20070316 17.40 GRAND TOTAL The grand total of economic activity supported by tourism is therefore 1608 mn sales by NI producers 783 mn gross value added, or 3.5 per cent of Northern Ireland's total GVA (GDP) 36700 jobs, or 5 per cent of the posts in Northern Ireland Figures may not add precisely due to rounding 23
Measuring tourism: a new approach Tourism Satellite Accounts How is tourism s economic contribution to be managed? The dictum of the management thinker Peter Drucker applies: You can t manage what you can t measure. When it comes to measuring tourism the steering group for a National Review of UK Tourism Statistics arrived at the following summary in 2004: Due to the sheer diversity of tourism services, and the unique challenge of measuring a consumerdefined industry, we have come to believe that there is no other sector in the UK economy as significant as tourism in which the key strategic and management decisions are so hampered by a lack of adequate data. Existing sources are no longer fit for purpose and the potential economic, social and environmental contributions of the tourism sector will only be realised if priority is allocated to better measurement. Tourism Satellite Accounts Table 4 Northern Ireland 2003 Internal tourism consumption, by products and types of tourism Other Internal tourism components of consumption (in Visitors final consumption expenditure in cash visitors cash and in consumption kind) Domestic Internal tourism Inbound tourism tourism consumption in consumption consumption cash Products A. Specific products A.1 Characteristic products (a) 1 Accommodation services 1.1 Hotels and other lodging services (3) 82 406 33 258 115 663 115 663 1.2 Second homes services on own account of for free 19 170 19 170 2 Food and beverage serving services (3) 98 168 314 837 413 005 413 005 3 Passenger transport services (3) 14 228 42 567 56 795 56 795 3.1 Interurban railway (3) 152 10 308 3.2 Road (3) 3 012 22 568 3.3 Water (3) 40 3.4 Air (3) 40 3.5 Supporting services 3.6 Transport equipment rental 10 984 9 690 20 674 20 674 3.7 Maintenance and repair services 4 Travel agency, tour operator and tourist guide services 4 042 57 826 61 867 61 867 4.1 Travel agency (1) 4.2 Tour operator (2) 4.3 Tourist information and tourist guide 5 & 6 Recreational, cultural and sporting services (3) 14 607 65 154 79 761 79 761 5.1 Performing arts 5.2 Museum and other cultural services 6.1 Sports and recreational sport services 6.2 Other amusement and recreational services 7 Miscellaneous tourism services 10 928 47 328 58 256 58 256 7.1 Financial and insurance services 5 081 19 610 24 691 24 691 7.2 Other good rental services 7.3 Other tourism services 5 847 15 538 21 386 21 386 A.2 Connected products distribution margins goods (4) services Tourism Satellite Accounts Table 1 Northern Ireland 2003 B. Non specific products-retail 83 201 422 705 505 906 505 906 distribution margins 24 608 149 993 174 601 174 601 goods and services(4) Inbound 35 259 tourism 194 881 consumption, 230 141 by 230 products 141 and categories of visitors VAT and other product taxes 23 334 77 830 101 164 101 164 visitor final consumption expenditure TOTAL net of distribution 307 580 margins 983 and 675 agency/ 1 tour 291 operator 254 margins 19 170 1 310 424 Value of domestically produced goods net of distribution margins and tax 4 702 9 800 14 502 Value of imported goods net of distribution margins and tax 24 460 133 796 158 257 Same-day Value of domestically produced services net of tax 225 064 641 787 Products 866 851 19 170 VFR Holiday Business Other visitors Value of imported services net of UK tax 9 021 39 096 48 118 (a) See note under Table 1 (*) Corresponds to 1.3 in table 1 (**) Corresponds to 2.9 in table 2 to as visitor final consumption expenditure in A. Tourism-specific products (a) A.1 Characteristic products 1 Accommodation services 1.1 Hotels and other lodging services (3) 5 204 13 881 58 060 5 260 82 406 (***) These components (referred kind, 1.2 tourism Second social transfer homes in services kind and on tourism own account business or expenses) free of charge X are recorded separately as these components are not easily attributable by types of 2 tourism Food and beverage serving services (3) 10 277 45 462 12 847 24 097 5 485 98 168 3 Passenger transport services Internal to Northern Ireland (exc own vehicle) 1 505 4 133 2 119 5 659 811 14 228 (1) Corresponds to the margins of the travel agencies 3.1 Interurban railway (3) 16 44 23 60 9 152 (2) Corresponds to the margins of the tour operators 3.2 Road (3) 319 875 449 1 198 172 3 012 (3) The value is net of the amounts paid to travel agencies and tour operators 3.3 Water (3) 4 12 6 16 2 40 (4) The value is net of distribution margins 3.4 Air (3) 4 12 6 16 2 40 3.5 Supporting services 3.6 Car hire etc 1 162 3 191 1 636 4 369 626 10 984 3.7 Maintenance and repair services 4 Travel agency, tour operator and tourist guide services 64 393 669 2 661 254 4 042 4.1 Travel agency (1) 4.2 Tour operator (2) 4.3 Tourist information and tourist guide 5 & 6 Recreational, cultural and sporting services (3) 1 499 7 159 2 516 2 775 658 14 607 5.1 Performing arts 5.2 Museum and other cultural services 6.1 Sports and recreational sport services 7 Miscellaneous tourism services 1 136 4 656 1 774 2 561 801 10 928 7.1 Financial and insurance services 528 2 165 825 1 190 372 5 081 7.3 Other tourism services 608 2 491 949 1 370 429 5 847 6.2 Other amusement and recreational services Two years later some aspects of 7.2 Other good rental services A.2 Connected products distribution margins goods and services(4) the UK data have grown more problematic because of social and economic changes. In particular, X does not apply (1) Corresponds to the margins of the travel agencies telephone surveys meet (2) Corresponds to the margins of the tour operators (3) The value is net of the amounts paid to travel agencies and tour operators which are shown separately in category 4 (4) The value is net of distribution margins which are itemised in the line above and includes purchases for motoring increasing consumer resistance, especially amongst the more affluent social and economic groups that tend to spend more on tourism. As much of the data is survey-based and the law of large numbers means we can be less confident of data when fewer people are sampled, the reliability of the results for individual regions of the UK is much less than for the UK as a whole. This problem is greatest in Northern Ireland, the smallest region, and in addition two of the four key UK surveys 1 do not collect data in Northern Ireland at all. memo: taxes on products included above 1 262 6 180 3 142 9 173 1 241 20 997 B. Non specific products-retail 8 697 45 330 9 138 16 525 3 511 83 201 distribution margins 2 561 15 688 2 359 3 093 907 24 608 goods and services(4) 3 688 18 702 3 958 7 392 1 519 35 259 VAT and other product taxes 2 449 10 940 2 820 6 040 1 085 23 334 TOTAL 23 179 112 338 42 944 112 338 16 780 307 580 number of trips (000s) 620 896 340 603 111 2 570 number of overnights (000s) 4612 1153 2217 887 8 869 (a) Although called 'products', the international TSA manual includes no goods as 'characteristic' for the time being. Total 1 The four key UK surveys are the UK Occupancy Survey, the UK Travel Survey, the International Passenger Survey, and the Great Britain Leisure Day Visits Survey. The latter two do not operate in Northern Ireland. 24
However, there are some aspects of tourism data where Northern Ireland is bettermeasured than other UK countries and regions since in UK national surveys the sample size for areas such as Northern Ireland is likely to be small. Measuring tourism is not an easy task because, as the steering group said, the industry is consumer-defined. Conventional industries are defined in terms of processes and activities or, for convenience, the products they produce. But there is no single tourist industry: many conventional industries serve the tourist, and tourism is defined as the activities of persons travelling to and staying in places outside their usual environment. Accordingly, international statistical agencies and the World Tourism Organisation have developed a new standard, Tourism Satellite Accounts which describe how tourism fits into a national economy measured by the standard System of National Accounts 2. The TSA method has now been adopted by more than 70 countries. Two years ago a project known as First Steps set out to apply the TSA method to Northern Ireland That project made significant progress, but was limited by the availability of information both on tourism and on the wider structure of the Northern Ireland economy. For the present report many of these limitations have been addressed, notably as regards the wider structure and context. Part of this report presents provisional tables of a new Tourism Satellite Account for Northern Ireland, updated by three years. Volume Two of this report series presents the methodology behind these accounts. A separate report, Social Accounts and Input-output Tables for Northern Ireland, presents the framework for the wider structural measurement of the Northern Ireland economy. Although these estimates are as firmly based as possible, drawing on many of the statistical sources for Northern Ireland, the United Kingdom and the Republic of Ireland as was appropriate and feasible, the data and estimates must still be considered provisional. This report thus represents a Second Step from which increasingly confident strides can be made. It combines aspects of both a top down and a bottom up approach to economic measurement of tourism, and thus places Northern Ireland in the vanguard of measuring tourism below the level of the sovereign state. 2 Following the collapse of communism in the early 1990s, the UN System of National Accounts has been adopted universally. EU directives implement it via the compulsory Eurostat standard ESA95 with which national statistical agencies like ONS must comply. 25
Part One The tourism market in Northern Ireland, tourism spending and market shares 26
1. The market overall A tourist is officially someone outside her or his normal environment and a key aim of this report was to come up with a reliable estimate of the economic value of tourism to Northern Ireland. The new statistical methods set out below lead to a figure for tourism spending in 2003 of 1278 mn. This is almost comprehensive, although there are some categories of visit which have defied measurement 3, so the total must be considered a slight underestimate. It is analysed in Figure 1, which shows out-of state visitors making up just less than a quarter of the market ( 308 mn), in five categories of visit determined by purpose, and four categories of tourism spending by Northern Ireland residents. Figure 1 Market overview Tourism spending of 1278 mn - the overall picture Domestic overnight tourists 10% Domestic spending of outbound tourist 8% Second homes in NI 2% Out of state same-day visitors 2% Out of state visitors to friends and relations 9% Out of state holiday visitors 3% Domestic same-day leisure visitors 56% Out of state business visitors 9% Other out of state visitors 1% Source: NITSA Ref P195 /2003/nitsa42003/ch1 3 examples are day business visits within Northern Ireland, and some cross border motorists 27
2. Inbound visitor spending The visitor from out-of-state, and indeed primarily the one who stays overnight, is the she or he who makes the most obvious direct injection to the Northern Ireland economy. Encouraging such visitors is the traditional reason for the founding of tourism promotional bodies such as the NITB and Tourism Ireland, and remains a major thrust of most tourism strategies, including Northern Ireland s. On the face of it Northern Ireland s performance looks impressive. Out-of-state overnight revenue reached 357 million in 2005, up from 7 million in 1959. In our base year of 2003 Northern Ireland receipts from 2.57 million inbound visitors totalled almost 310 mn. Business and family visitors accounted for almost a third each of the spending, the remaining third being split between same-day visitors and holiday/miscellaneous categories. Figure 2 Composition of inbound tourism spend Inbound tourism spend by visit category 308 mn Same-day visitors 23 200, 8% 112 300, 36% 16 800, 5% VFR Holiday Business 112 300, 37% 42 900, 14% Other NB Data labels show amounts in 000 Source: NITSA estimates Ref z:/p195/nitsa12003new/viscat ie2 This figure is part of a process of real growth in tourism income from outside which has averaged 5.0 per cent per year since 1975, as shown in Figure 3. This is almost twice as fast as the 2.7 per cent growth rate of the Northern Ireland economy as a whole, but over the first twenty years it was only just sufficient to recover the severe loss in the early 1970s. 28
Figure 3 Real inbound tourism spending in NI 1959-2005 Real growth in inbound overnight tourism spending in NI 18000 16000 14000 12000 10000 out of state spending deflated by RPI 8000 6000 4000 2000 Source: NITB, UN World Tourism Organisation, ONS, cogentsi calculations REF z/p195 Social Trends/realgrowth 0 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 I Global market perspective The incoming visitor figure represents a small share of a very large and rapidly growing global market, 0.3 per cent in terms of numbers and 0.1 per cent in terms of money. Figure 4 Global international tourist arrivals, visitors by continent International Tourist Arrivals, 1950-2004 800 700 millions 600 500 400 300 200 100 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 Middle East Europe Asia and the Pacific Americas Africa The number of tourists travelling the world has grown 30-fold since 1950, and most of the growth has been in Europe, in terms of holiday tourism to Mediterranean countries and business visits to commercial capitals. 29
Figure 5 Index of international tourism spending 1950-2005 World international tourism growth 1950-2005 International tourism spending in real terms Index, 1950=1.00 50.00 40.00 30.00 20.00 10.00 0.00 International tourism expenditure in real terms 7.3 per cent annual growth Source: UN World Tourism Organisation, Budget of the USA, cogentsi calculations REF z/industries/ttt/tourism/w orld tsm gth - r & a/ real growth 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 If we move from a simple count of people to measuring the economic significance in terms of real spending, the growth overall has been half as fast again, even though the setbacks in the 1980s and the 1990s were more severe. Globally, spending by tourists, and therefore the income of the industries and people serving them, has grown by a factor of 50, an average annual rate of 7.3 per cent over nearly 60 years. Recession and stagnation after 1980 and 1995 lasted for about five years, and are usually ascribed to the direct and indirect effects of Middle Eastern conflicts, extended in the latter case by 9/11. In each case it amounted to a downward stagger in the growth curve of around 20 per cent in real values. Not only has the amount of tourism changed, but so has the pattern of tourism. Even as incomes and leisure time increased, the availability of cheap jet flights was instrumental in switching demand from the domestic tourist towards sunnier (or snowier) destinations, and more recently to exotic resorts and cities. In the new destinations there has been a process of social and physical adaptation and learning, including the advent and assimilation of new migrants (national and international) to work in service industries. Meanwhile traditional destinations which lost market share, such as coastal resorts in moderate climes, have had to confront economic development issues and think about regeneration. Leisure tourism, as a global phenomenon, increasingly includes many more short breaks and sporting and activity holidays. The UN World Tourism Organisation estimated that these now make up the majority of global tourism growth, and they are market segments in which Northern Ireland is better equipped to compete than with the longer-break sun and winter sports destinations. Business tourism, both discretionary (e.g. conferences) and in service have both increased as the time and cost of travel has fallen in real terms, and as business itself has become more international. The opening up of some international labour markets has also had an effect, both on business trips and on tourism for study purposes. Another effect of the free movement of labour is that, increasingly, places that attract tourists find that they also have growing populations. In part this is because people 30
make choices of where to live and work (or retire) based on their travel experience, in part because the features of a region that make it good to visit also make it an attractive place for nationally and internationally mobile people to live. 4 4 Belfast City Airport has now been renamed as George Best Belfast City Airport 31
Northern Ireland tourism in a time perspective In Northern Ireland the loss of inbound market share was not a question of a steady process, but a sudden shock, as shown in Figure 6 5. Figure 6 NI share of global international tourism 1959-2005 NI arrivals and receipts from out of state visitors in ratio to world international totals 1.2% 1.0% Out of state visitor arrivals in ratio to global international tourism arrivals 0.8% 0.6% Out of state tourism expenditure in ratio to global international tourism receipts 0.4% 0.2% Source: NITB, UN World Tourism Organisation, ONS, cogentsi calculations REF z/p195 Social Trends/share 0.0% 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 Three quarters of Northern Ireland s global market share disappeared in the years 1969 to 1972. Since then the remaining core market share seems to have been welldefended, but consists significantly of less discretionary tourism, such as business trips and visits to relatives. However the innate attractiveness of Northern Ireland as a destination is evidenced by the level of penetration before the Troubles, and this provides hope for a developing economic contribution from tourism. 5 Strictly speaking, out of state arrivals are not international market share because many of them are not international, coming from Great Britain. 32
Comparisons with elsewhere This is perhaps seen most acutely in a market share comparison close to home, by comparing out-of-state visitors to Northern Ireland with those to the island of Ireland as a whole. Figure 7 Share of overseas visitors to Ireland 1960-2004 NI share of out-of-state visitors to the island of Ireland 40% 35% 30% 25% 20% 15% Source: NITB and Failte Ireland Ref: P195/social trends/ch3 10% 5% 0% 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 In 1969/70 the number of visitors to Northern Ireland was more than 60 per cent of the number to the Republic of Ireland or to put it another way, Northern Ireland garnered 36 per cent of all visitors to the island of Ireland. In the early 1970s the Republic and Northern Ireland both suffered a fall in tourism numbers, but the Republic recovered relatively quickly. Seven years later the share of Northern Ireland in overseas visitors dipped below 20 per cent, as shown in Figure 7. Since then the highest point, when currency exchange rates and relative prices were particularly favourable, has been 28 per cent and the level is now 21 per cent. It must, of course, be emphasised that the Republic s tourism product, and the promotion of it, have been considerably developed over the period. Nevertheless the comparison is striking. If Northern Ireland had matched external visitor trends in the Republic of Ireland since 1969, tourism income from this source would be expected to be worth some 270 million in 2006, or more than 11 000 jobs. In order to regain this share it would need to grow in real terms at 14 per cent per year over the next 10 years or 9 per cent over the next 20 years. In contrast, average growth in external tourism spending has been 3.6 per cent in real terms over the last 5 years. Thus the crude arithmetic of both the global and the Irish market share calculations would suggest that there is room for at least a doubling of inbound tourism activity. This could happen gradually, as the international community regains its confidence in Northern Ireland, begins to learn new habits and, hopefully, builds on positive, exciting and pleasurable experiences. 33