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A groundbreaking study by The Travel Foundation, Tui and PwC has quantified tourism’s benefit to destinations, as well as its negative impacts. Ian Taylor reports
Tourism’s impact on destinations far outweighs its negative effects, a Travel Foundation study has found.
That may sound obvious, but it’s not. The findings, published this week, are a first for the industry that until now has seen travel and tourism measured chiefly in arrivals and their estimated impact on GDP – or value to the economy.
The Travel Foundation study was conducted with Tui Group and business services and consultancy firm PwC in Cyprus.
It deployed a new method known as TIMM – Total Impact Measurement and Management – for quantifying impacts not juston the economy and taxation, but on the environment and destination communities.
The study took in eight mainstream hotels catering to 60,000 visitors – or 2.5% of the annual total to Cyprus.
The purpose was to assess the full impact of tourism and to enable comparisons between impacts in different areas, so that decision-makers may “compare alternative strategies”.
The importance of the study lies in what comes next. As the report on the findings points out, the need for sustainable tourism “is not reflected in conventional financial reporting or in management or investment decision-making, yet the success (or failure) of the sector depends on conditions in destinations”.
However, the findings are still significant. The study calculated the total economic impact of visitors to the hotels at an average €59 per customer per night. The tax impact was an additional €25 per night – about one-third of this in direct taxation.
By contrast, the environmental cost was €4 per customer per night, with greenhouse gas emissions accounting for €2.50, despite flights being excluded from the study.
Waste was the second-biggest environmental cost, with hotels producing 1.8kg of waste per customer a night, compared with 1.4kg for the average Cyprus resident – despite the hotels recycling more than domestic residents.
However, the suppliers to hotels and businesses serving tourists outside the hotels were found to generate 14 times as much waste – an average of 25kg per customer every day.
Tourism’s indirect benefits outweigh direct dividends
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The Total Impact Measurement and Management (TIMM) study suggests the indirect and ‘induced’ economic impacts of tourism exceed the direct ones.
It estimated the total economic impact of visitors to the eight Cyprus hotels at €32.3 million in 2013. Just over half (€16.8 million) was attributed to wages and €15.5 million to profit, investments and ‘intangibles’.
The direct economic impact amounted to €13.7 million or 43%. The indirect impact – spending by suppliers and by Tui customers outside the hotels – was €11.9 million. The induced impact (spending by staff of hotels, supply chain businesses, ground-handlers and so on) was €6.7 million.
Put another way: “Customers’ discretionary spending has a greater economic impact per euro of spend than spending by hotels. Every euro spent by the hotels generates €0.57 in further economic impact, compared with €0.65 for every euro of discretionary spend by customers.”
The study found 37% of food and beverage bought by the hotels was produced in Cyprus, while government figures suggest 71% sold elsewhere in Cyprus was from local suppliers.
The tax impact was €13.8 million, of which 33% was in direct taxation – 10 percentage points below the proportion of direct economic benefit. The report attributed this to the “tourism supply chain employing relatively lower-paid employees” than other sectors.
The environmental cost was €2.2 million, with impacts identified in six categories: greenhouse gases, air emissions (and the health impacts), waste disposal, land use (and degradation), water pollution and water use.
The study found tourism “did not limit” the clean water supply to the population, and although it identified electricity production as “a significant contributor to air pollution” and noted that air pollution in Cypriot cities “regularly exceeds” EU limits, it found that tourism accounted for only 10.9% of electricity demand.
Regarding social impacts, the study looked at the skills and wellbeing of employees, costs of public infrastructure and services, and cultural heritage.
The biggest social benefit was the provision of work experience, valued at up to €3.4 million.
The study found almost 10% of workers earned below the living wage, but “employees do not experience poorer levels of life satisfaction” than other sectors.
The cost of providing public services to visitors was put at €0.20 per customer a night.
Total Impact Measurement and Management
Total: assesses social, environmental, tax and economic impacts
Impact: looks beyond inputs and outputs to outcomes and impacts
Measurement: quantifies and monetises impacts
Management: allows evaluation of options
The social impact includes the impact on livelihoods, skills and natural heritage.
TIMM uses a range of measurement and valuation methods on three levels: direct (results of business activities); indirect (impacts generated in the supply chain and which support customer activities); and induced (impacts generated by staff spending).
The approach is consistent with World Travel & Tourism Council, European Commission and World Bank studies.
The study used 2013 data and involved interviews with government departments and local municipalities, and two surveys of 600-plus hotel staff.
Travel Foundation chief, Salli Felton
“We’re all aware tourism can have a profound impact on destinations. Yet it’s striking how little we know about the impact, given tourism’s reach.
“For the first time on this scale, we’ve measured the impacts of a large operator in a mainstream destination.
“The pilot has provided insights into measuring impacts, and understanding and managing tourism for the benefit of all.”
Could this type of in-depth survey be extended?
The TIMM study showed it’s possible to measure the wider impacts of tourism in a way that has not been done before.
The report identifies two key benefits: first in developing a baseline against which to track changes over time; second, in providing new insight into tourism’s impacts, “enabling destination governments to identify which demand most attention”.
Clearly, the methodology could be applied to measure the impact of different types of tourism, different types of visitor, different board bases or accommodation. It could be extended to cover flying or the impact of building, refurbishing and demolishing hotels.
The report adds a note of caution: “Though the value of an impact may be small, it may build and become significant.”