The Economic Case for the Visitor Economy'

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The Economic Case for the Visitor Economy.
Rashid Bashir
11 November 2008
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Contents

• Scope
• Framework and methodology
• Current economic contribution
• Long term growth opportunities
• Short term challenges
• Leverage points
• Policy considerations
• Policy barriers and market failures.

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Scope
The overarching aim of the research is to provide
an analysis of the contribution of visitor
economy to the British economy.

• In summary, the study scope included
• Quantifying direct and indirect economic benefits
  of the visitor economy, including scenario
  analysis
• Highlighting the visitor economys contribution
  to the wider socio-economic policy agenda through
  case studies and information gathered from
  stakeholder consultations
• Highlighting the key market failures and
• Identifying policy failures and leverage points
  (areas of focus to add further value).

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Framework
To guide the analysis a framework was developed
to identify and understand industry drivers and
links to the wider economy.
.
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Methodology
The study was structured using a three-tiered
approach.

• 1. MODELLING
• Direct contribution of visitor economy-related
  industries and
• Indirect contribution that incorporates indirect
  effects (via the supply chain), the impact of
  capital investment and collective government
  expenditure.
• 2. WIDER QUANTITATIVE ANALYSIS
• Data analysis to assess wider economic and policy
  impacts.
• 3. CONSULTATIONS
• Public sector stakeholders (including DCMS and
  HMT)
• Major UK visitor economy-related businesses
  (including firms operating in the hotels and
  catering, retail, and entertainment sphere) and
• Non-related businesses (including manufacturing).

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Current economic contribution
Visitor economy worth more than previous
estimates.

• DIRECT
• GDP 52 billion (3.7 per cent)
• Employment 1.36 million
• TOTAL (DIRECT AND INDIRECT)
• GDP 114 billion (8.2 per cent)
• Employment 2.6 million
• SPILLOVER IMPACT
• Retail
• Manufacturing
• Health.

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Wider socio-economic effects
There are wider socio-economic impacts of the
visitor economy.

• Economic and social inclusion
• Enterprise business formation
• Sustainable development impacts
• Regeneration impacts.

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Growth Potential Long term opportunity
Over the next 10 years, the sector is expected to
grow but the share of the total economy would
remain similar to current levels

• LONG TERM
• Total economic contribution of 188 billion
• Employment growth to 2.8 million
• Share of the economy broadly similar to current
  levels at around 8 per cent
• UNDERPINNED BY
• Primarily driven by overseas visitors but
  domestic is likely to grow as well
• 45 million visitors by 2018 compared to 32.6
  million in 2007
• Transport, attractions and accommodation
  improvements (quality and capacity) are assumed
  failure to invest (by public sector and industry)
  could undermine this
• More proactive approach to the development of the
  UK visitor economy (including addressing
  investment, marketing and market failure issues)
  could allow the UK to sustain its share of
  inbound tourism and grow further.

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Growth Potential recession challenges
Over the next three years, it would be a very
challenging environment and the base case is
likely to be replaced by our recession scenario

• In the light of current economic downturn, the
  analysis was reviewed
• Revised analysis 2007 analysis accurate
• 2018 projected growth still achievable but at a
  greater risk
• Over the next three years
• GVA is expected to be 11 billion below base case
• Employment 114,000 below base case
• Exchange rate competitiveness and import
  substitution present opportunities for the
  industry but a concerted effort is required to
  minimise damage.

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Leverage points
The economic impact of the visitor economy is
driven by visitor numbers and associated
spending.

• Ultimately, the quality of the offer and
  perceptions (marketing) drive the visitor numbers
  and spending delivering direct and indirect
  economic benefits.

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Policy considerations
Quality of the offer and visitor experience are
critical for high value added visitor economy.

• Maximise volume and value (led by industry)
• Improve offer and quality of experience
• Targeted marketing (including domestic)
• Adaptability globalisation, climate change and
  emerging markets (led by industry and tourism
  bodies)
• Maintain attractiveness of the offer
• Explore new markets/value propositions?
• Support long-term drivers of economic growth (led
  by industry, Government and public sector)
• Infrastructure
• Innovation
• Skills
• Coordination of policy and delivery (led by
  public sector/NTO).

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Policy barriers
Wider (non-tourism specific) policy barriers can
have significant impact on the outcomes for the
visitor economy.

• Transport infrastructure
• Entry costs and border policy
• Limits on movement
• Climate change legislation
• National and regional policies and
• Influencing policies (where possible) and
  adapting to new realities is the key for a
  dynamic visitor economy.

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Market failures
Market failures suggest that public sector
intervention is essential to maximise economic
impacts.

• Imperfect information significant failures
  where both consumers and businesses in the
  visitor economy suffer from information gaps and
  potential visitors (both overseas and domestic)
  do not have the relevant information to use in
  their decisions
• The free-rider problem - due to the fragmented
  nature of the industry, individual business or a
  group of businesses are unlikely to market a
  place
• Positive and negative externalities choice,
  heritage, culture, global profile as well as
  congestion and climate change and
• Skills training provision - due to labour
  mobility and the seasonality of the tourism
  employment market, there are limited incentives
  for businesses to invest in skills where employee
  turnover is high.

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So what?
Communicate your contribution, take advantage of
growth opportunities and deal with the short term
challenges complacency is not an option.

• Big industry
• Significant long term growth potential
• Real short term challenges but you can do
  something about them
• Long term would not happen unless industry and
  government work together to pull all necessary
  levers
• Framework review is a key opportunity to deliver
  a clear strategy and delivery plan.

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Member of Deloitte Touche Tohmatsu
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See more notes and presentations from the 11
November event on www.tourismreview.co.uk