The Economic Importance of Tourism - UK Tourism Satellite Accounts: 2009

• Tourism Direct Employment rose from 1,723,000 in 2008 to 1,797,000 in 2009

• Tourism Direct FTEs rose from 1,347,000 in 2008 to 1,426,000 in 2009

• Domestic tourism expenditure was £90.9bn in 2009 compared to £96.6bn in 2008

• Inbound tourism expenditure was £19.3bn in 2009 compared to £19.7bn in 2008

The UK Tourism Satellite Account (UK-TSA) provides information about the demand for goods and services associated with the activity of tourists and the relationship of this demand to the supply of such goods and services within the UK economy.

The TSA methodology is necessary because tourism is defined by the characteristics of the customer and, therefore, differs from “traditional” industries such as manufacturing and agriculture which are defined by the goods and services produced.

The UK-TSA sets out the contributions that tourism makes to the economy of the UK as a whole and to individual “tourism industries” in particular. Such industries invariably serve tourists and non-tourists alike and the UK-TSA includes a series of “Tourism Ratios” which estimate the proportions of products supplied in the UK that are consumed by tourists.

The Tourism Intelligence Unit (TIU) in the Office for National Statistics (ONS) has produced the 2009 UK-TSA and was also responsible for the 2008 version released in June 2011. The underlying concepts and methodology in the two releases only differ slightly but improvements to the data sources mean that this new release includes updated 2008 UK-TSA estimates.

It should be noted that the UK-TSA uses National Accounts data which are published almost two years after the reference date. Because of this it will not be possible to produce a full 2010 UK-TSA until late 2012 or early 2013.

In this report we present the findings from the 2009 UK-TSA, the data for which is included in a set of tables available as a separate download. As well as providing an indication of the economic importance of tourism in the UK, the report includes detailed information about tourism demand and supply. We also explain some of the internationally agreed concepts and definitions that are part of the TSA process and discuss the methodology and data sources that we have used.

The UK Tourism Satellite Account (UK-TSA) indicates that tourism demand was responsible for 3.6 per cent of all goods and services supplied in the UK economy in 2009. In total, internal tourism consumption in 2009 was about £113 billion, compared with £118 billion in 2008. Around two thirds of this total was on tourism characteristic products, as shown in Figure 1.

Demand for most tourism characteristic products came from tourists and non-tourists alike. The UK-TSA includes tourism ratios which provide an estimate of the proportion of each product that was consumed by tourists. As Figure 2 indicates, this was close to 100 per cent for accommodation services and travel agency services and above 50 per cent for three other products. Almost a third of food and beverage serving services supplied in the UK in 2009 were consumed by tourists.

The tourism ratios allow for the calculation of Tourism Direct GVA (the proportion of GVA accounted for by tourism expenditure). In 2009 Tourism Direct GVA was £44.6 billion compared to a revised figure of £46.1 billion in 2008.

Employment

The UK-TSA includes estimates of employment directly relating to tourism, known as “tourism direct employment”. These estimates are calculated by combining tourism ratios and total employment data for specific industry groups. In 2009, tourism direct employment within the UK was estimated to be 1.80 million, an increase from 1.72 million in 2008. Figure 3 shows how this was broken down by industry group.

When tourism direct employment is expressed in terms of full-time equivalent workers (FTEs) the breakdown by industry group differs, as Figure 4 illustrates. This reflects different levels of part-time working. In total, Tourism Direct FTE employment was 1.43 million in 2009, up from 1.35 million in 2008.

The definitions used in the UK-TSA are internationally agreed and are discussed in more detail in the “The Tourism Satellite Account Explained” section. It should be noted, for example, that “tourism visits” in the UK-TSA are not restricted to holidays but include activities such as visits to friends and relatives, shopping excursions and business related trips.

Figure 1 showed that total Internal Tourism Consumption for 2009 was around £113 billion. This is made up of expenditure in the UK by inbound and outbound tourists, domestic day visitors and domestic overnight visitors. Figure 5 shows the breakdown of expenditure by visitor type and illustrates the change in expenditure between the revised 2008 totals and 2009.

Inbound Tourism Expenditure

Table One of the UK-TSA is available as part of a full data download and gives details of expenditure by overseas residents on tourism visits to the UK. The estimated total in 2009 was £19.4 billion broken down by product as in Figure 6. As well as all expenditure within the UK, this includes fares paid to UK carriers on travel to and from the UK. The 2009 total was slightly below the expenditure of £19.7 billion in 2008.

The International Passenger Survey (IPS) gives information about total inbound tourism expenditure. The IPS is a continuous survey carried out by the Office for National Statistics (ONS) which includes interviews with overseas visitors as they leave the UK at the end of their visits. Because the IPS does not provide a detailed breakdown of expenditure, we have used estimates of non-resident household expenditure from the annual ONS Supply and Use Tables (SUTs) to provide such a breakdown (see the Sources and Methodology section of this report for further information).

Domestic Tourism Expenditure – Overnight Visitors

Table Two of the TSA (part of the data download) 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.

In 2009, total expenditure by domestic overnight visitors in the UK was approximately £21.9 billion, an increase on the (revised) 2008 total of £21.1 billion and broken down by product as shown in Figure 7.

The main source of statistical information for domestic overnight visitors is the UK Tourism Survey (UKTS), a continuous face-to-face interview survey commissioned jointly by the national tourist boards within the UK. This includes an expenditure breakdown by product which we have refined using information from the new (2011) Great Britain Day Visits Survey, specifically from respondents who were at a holiday base.

Domestic Tourism Expenditure – Excursionists

The new UK-TSA includes estimated expenditure of £46.9 billion by domestic excursionists (day visitors) in 2009, a decrease from the revised 2008 estimate of £48.8 billion. Over three quarters of the 2009 total related to food and drink or “other” non-tourism products as Figure 8 shows.

The main sources of data for 2009 domestic excursionist expenditure are the new (2011) Great Britain Day Visits Survey and annual Household Final Consumption Expenditure (HHFCE) data for each tourism product. The latter enables data from the former to be transformed into data for earlier years. This process assumes that the same proportion of overall household expenditure is used for day visits in 2008 and 2009 as in 2011. Northern Ireland day visit data are added to produce a UK wide figure.

Domestic Tourism Expenditure – Outbound Trips

Table Two of the UK-TSA includes an estimate of expenditure within the UK by residents making overseas visits. In 2009, this totalled £22.1 billion, more than half of which was air fares, as Figure 9 illustrates. The 2009 figure was 17 per cent smaller than the revised 2008 equivalent, reflecting a similar decrease in the number of overseas visits by UK residents.

One of the main sources for this part of the UK-TSA is the ONS International Passenger Survey (IPS) which provides information about expenditure on fares and package holidays. We have also used a 2005 report on expenditure at airports with multipliers based on Household Final Consumption Expenditure (HHFCE) data to produce 2008 and 2009 estimates.

Non-Domestic Tourism Expenditure: - Outbound Trips

Table Three of the TSA (available in the data download) gives details of expenditure during overseas visits by UK residents. 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. The 2009 total was £31.7 billion, down from £36.8 billion in 2008 and split by product as in Figure 10.

As with Table One, the main data sources are the International Passenger Survey (IPS) and annual Supply and Use Tables (SUTs). The latter include a breakdown by product of UK resident household expenditure abroad.

Other Internal Tourism Consumption

Table Four of the UK-TSA brings together data from Tables One and Two and adds an estimate of expenditure on services associated with vacation home ownership. The latter is based on information from the ONS annual “Family Spending” publication.

The Sources and Methodology section of this report includes further details of the sources used and explains how they differ from the UK-TSA estimate for 2008 that was published in 2011.

Introduction

The Tourism Satellite Account (TSA) 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 TSA is regarded as the central component of an Integrated System of Tourism Statistics (ISTS) and is used as a tool to assess the value of tourism, and 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.

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 the 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.

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. 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.

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 macro-economic 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 can then be produced, for example 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, specifically tourism consumption (or expenditure of tourists).

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. Table 1 shows the categories of tourism activities and products used in the TSA.

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.

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’. 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 tables are available in the data download part of this release.

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. This is the case with our UKTSA for 2008 which has been revised where improvements to data have occurred. 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 that impact on this accuracy, particularly on the demand side from tourism surveys, 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.

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 of the TSA.

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 tourism direct 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 (the total supply of tourism products).

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 forms of analysis such as input-output analysis or computable general equilibrium (CGE) models (TSA:RMF, 2008). 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.

The 2009 UK Tourism Satellite Account (UK-TSA) is the successor to the 2008 UK-TSA (published in late May 2011). Improvements to data sources and other changes to methodology mean that data in the current report and in the May 2011 release cannot be directly compared. Therefore we have included revised versions of the Tourism Satellite Account tables for 2008 in the data download accompanying this release. This section of the release gives information about changes to data sources and methods and then summarises the sources for each UK-TSA table.

New Sources and Methodology

The new Great Britain Day Visit Survey (2011) has resulted in improvements to the quality of the data in the UK-TSA. As well as covering a larger geographical area than the 2005 English Leisure Visits Survey that previously fed into the TSA, the new survey has better-focussed questions which lead to a more useful division of expenditure data. A particular consequence of the new questions is that expenditure previously defined as being on "other consumption products" have been allocated to specific tourism products in the new TSA.

Recent changes to classifications in the UK Supply and Use Tables have also simplified the breakdown of data by product. For example, the new tables include separate “Accommodation” and “Food and Beverage Service Activities” classifications rather than the previous single “Hotels, catering, pubs etc” classification. In addition the previous single “Recreational services” classification has been replaced by classifications relating to cultural activities and sport and recreation.

These classification changes are part of the migration of ONS data from the 2003 Standard Industrial Classification (SIC 2003) to the 2007 equivalent (SIC 2007). This has particular advantages for production of the UK-TSA as tourism industries in the TSA Recommended Methodological Framework from the United Nations were defined using the equivalent of SIC 2007. The previous version of the UK-TSA used SIC 2003 data that required conversion to approximate SIC 2007 equivalents, thus adding a degree of uncertainty to the final data.

The methodological change in this version of the UK-TSA that has resulted in the largest change to previously published data is the inclusion of air, ferry and Channel Tunnel fares paid to UK carriers by overseas residents visiting the UK. Fares paid by UK residents on overseas visits are also included (as before) with all nationalities of carrier included. A further methodological change is the inclusion of expenditure on all services relating to holiday home ownership within “other consumption products” rather than within accommodation services for visitors.

As in the UK-TSA for 2008, for travel agency products 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 as for other goods and services – using the 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 agency services.

Sources of Demand Data

International Passenger Survey (IPS) 2009

The IPS provides estimates of the expenditure on visits to the UK by overseas. This has been used in Table One of the UK-TSA where it is combined with estimates of expenditure on fares paid to UK carriers for inbound travel (also extracted from IPS findings). Together these provide estimates of total inbound tourism expenditure but the IPS provides no detailed breakdown of expenditure by product so further sources have been used for such a breakdown (Supply and Use Tables).

The IPS also provides expenditure data on visits abroad by UK residents which have been used to provide the totals in Table Three (outbound tourism expenditure). The lack of a breakdown by product again requires the use of Supply and Use Tables to complete the table. Estimates of expenditure on fares paid for outbound travel are not included in Table Three but are in the part of Table Two showing domestic tourism expenditure on outbound trips. Again, the fare information is sourced from the IPS but in this case all nationalities of carrier are included.

Input- Output Supply and Use Tables 2009

Supply and Use tables are part of the UK National Accounts system. They are annual tables, compiled around 18 months after the year in question and they include three tables for each year, one of which is divided into two. The tables relate to supply of products, demand of products (split into intermediate and final demand) and households final consumption expenditure (HHFCE).

The HHFCE table includes two columns of information about non-resident household expenditure in the UK and UK resident household expenditure abroad. The totals are broken down into expenditure relating to 110 products and these are used in Tables One and Three of the UK-TSA to apportion total expenditure from the IPS to tourism products. Although the HHFCE table does not solely relate to tourists, we have assumed that they make up such a large proportion of each total that the HHFCE data make a good proxy for a breakdown of the expenditure in the IPS.

United Kingdom Tourism Survey (UKTS) 2009

The UKTS is an annual survey jointly sponsored by national tourist boards. The respondents are UK residents who are asked about the volume and value of their tourism visits within the UK that include an overnight stay. The UKTS total expenditure feeds into the domestic overnight visitors’ column of Table Two and provides some breakdown by product. We also used an analysis of visits from holiday bases using data from the 2011 Great Britain Day Visits Survey to finalise the product breakdown in Table Two

Great Britain Day Visits Survey (GB-DVS) 2011

The GB-DVS is the first Great Britain-wide survey of day visits since 2002/3 and replaces the 2005 England Leisure Visits Survey (ELVS) as the data source for the relevant column in the UK-TSA Table Two. Analysis of responses to the GB-DVS has provided the required split of expenditure by product but a further data source, Consumer Trends, has been required to convert the 2011 data to 2009 equivalents.

Northern Ireland Continuous Household Survey 2011

The new GB-DVS does not interview residents of Northern Ireland although it does provide information about visits to it from other parts of the UK. We have therefore combined data on Northern Ireland day visits from the Continuous Household Survey with the GB-DVS data before converting to 2009 totals using Consumer Trends.

Morgan Stanley Survey of Airport Spend 2005

Table Two of the UK-TSA includes an estimate of domestic tourism expenditure on outbound trips. As well as fares data from the IPS, we have used the results of a survey undertaken by Morgan Stanley in 2005 which provided an estimate of expenditure by product in UK airports. We have assumed that the data can be extended to include other points of departure and have used Consumer Trends data to convert 2005 data to 2009 equivalents.

ONS Consumer Trends 2005 – 2011

Detailed Household Final Consumption Expenditure (HHFCE) estimates are published annually and quarterly in ONS’ Consumer Trends. The data are broken down by product and this has allowed us to convert non-2009 expenditure by product from tourism surveys to 2009 equivalents in Tables One and Two. The assumption is that tourism expenditure on specific products in these cases has risen or fallen by the same proportions as overall HHFCE on the same product.

Sources of Supply Data

Annual Business Survey (ABS) 2009

The ABS is used to extract the proportion of SUT products or activities (e.g. cultural activities) that are tourism and non-tourism. We use SIC 2007 5 digit estimates of output to extract these proportions. The ABS is also used to determine the number of enterprises in tourism characteristic industries in Table 7.

Annual Population Survey (APS) 2009

The APS is used to determine the proportions of self-employed individuals in the tourism characteristic industries for table 7. APS data is also used to split the output of accommodation services between accommodation and food and drink in Table 7. This is done by examining the proportion of people engaged in occupations relating to accommodation and food and drink in the accommodation industry. This is because output attributable to the serving of food and drink should be accounted for under food and beverage serving activities within the TSA.

Annual Survey of Hours and Earnings (ASHE) 2009

ASHE is used to determine the average hours worked in tourism characteristic industries to better determine the Full Time Equivalents estimates in Table 7.

Business Register and Employment Survey (BRES) 2009

BRES is used to determine the proportions of employees in the tourism characteristic industries in Table 7.

Input Output and Supply Use Tables – the Make Matrix or detailed supply matrix (2009)

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 as it is just used to apportion industry, or activity, output across tourism products.