Difference between revisions of "Impacts originating from the tourism sector"

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Under the GESINPORTS project (Interreg IIIC) a research study was carried out in order to produce information on the economic impacts of tourist facilities on the economic development of a region facilitating thus decision making both in the public and private sector. The aim was to quantify the economic impact of each facility on the town where it is established, in terms of job creation, wages, corporate profits, tax income and the effect on the rest of town’s productive sectors. Similarly, it is also of great interest to indicate how such a facility can continue influencing economic development in the future.

Economic Impact of Western Mediterranean Leisure Ports

The study has analysed the economic impact of a selection of 10 leisure ports in the Valencia Region and 3 ports in northern Italy (provinces of Genova and Imperia) on the towns where they are located.

The economic impact of these ports has been analyzed by means of Input-Output methodology using Input Output Tables for the town where the leisure port is located. The basic information used was regional IOT tables, published by the Region of Valencia for the Spanish part of the case study, and the national IOT table for the Italian part of the study. In order to obtain sufficiently detailed results, we used further information from a publication by “La Caixa”^[1] on the towns where facilities are located, which makes it possible to elaborate IOT for each of them. In a similar way the national Italian IOT was updated and specified for the Liguria region^[2].

Results Obtained for Leisure Ports in Valencia

Analysing the economic impact of leisure ports, provides a point of reference for public and private sector decision making related to the port sector. In addition to this, results will make it possible to compare sports structures as the same methodology has been used in all cases and an attempt has been made to focus on the town where ports are located or the nearest area of influence as in the case of Italian installations. In the first place, purchase structures and the value added to infrastructures are analysed to determine the presence of possible significant differences between the two. Later, in order to simplify observations, the economic impact results obtained from quantifying the initial, direct, indirect and induced effects are presented in an aggregated form.

Purchase Structure

The purchase structure of nautical-sports facilities was obtained from surveys and the annual accounts of the individual leisure ports under study. After analysing the data, it can be appreciated that while there are important differences across ports, at least two sectors stand out in all of them: in goods, “Energy” and in services, the branch of activity called “Other Market Services” [Table 1]. “Energy” represents up to 40% of purchases in some facilities, such as Oropesa Yacht Club. This branch of activity encompasses the following types of products: fuel, electricity, gas, water and residual collection. All these products are necessary for the users of these facilities to be able to carry out their nautical and leisure activities.

“Other market services” are important in proportion to the rest of supplies due to the nature of the business activity these facilities conduct. It is important to bear in mind that this sector includes the following types of services: educational, health, social, associative, recreational, cultural, sports and other personal services. More specifically, the Yacht Clubs in Denia, Orihuela (“Campoamor”) and Torrevieja more than 35% of their expenses come from these activities. However, in “Marina de las Dunas” and Denia Marina these services are not as relevant, as their activity is less recreational than that of yacht clubs.

It is also worth mentioning the “Trade and Repairs” sector, which differs in order of importance depending on the facility, but accounts for more than 10% of expenses in most, due to the constant maintenance and repairs that infrastructures and all vessels require. Other relevant sectors depending on the individual situation and configuration of each port are “Construction” and “Financial Intermediation”, together with “Real Estate Agencies and Business Services” in the case of the Royal Yacht Club of Valencia and “Machinery” in the facilities in Denia, Santa Pola and Altea.

Table 1: Nautical Facility Purchase Structure (2004)
Sector	OROPESA YACHT CLUB	R.Y.C. of VALENCIA	DENIA MARINA	DENIA YACHT CLUB	LES BASSETES Y.C.	MARINA DE DUNAS
Agriculture	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Energy	40.29%	9.48%	31.86%	13.99%	34.12%	28.46%
Food	0.00%	0.95%	0.00%	0.00%	0.00%	0.00%
Clothing and Footwear	1.48%	1.33%	7.66%	2.81%	1.30%	1.84%
Chemical Industry	7.91%	3.79%	0.00%	0.51%	0.32%	9.80%
Other Non-metallic Products	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Metallurgy	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Machinery	0.00%	0.57%	21.49%	5.10%	3.65%	0.00%
Electrical Equipment	0.00%	0.57%	0.00%	0.54%	0.54%	0.00%
Transport Material	1.90%	1.33%	0.00%	0.00%	0.00%	2.36%
Misc. Manufactures	0.00%	0.95%	5.13%	0.89%	0.87%	16.99%
Construction	0.00%	8.10%	0.00%	0.00%	0.00%	0.00%
Trade and Repairs	29.01%	12.16%	4.44%	9.50%	8.74%	20.49%
Hotels and Restaurants	0.00%	1.62%	4.01%	2.24%	3.55%	0.00%
Transport & Communications	0.07%	2.43%	1.34%	1.91%	4.30%	0.05%
Financial Intermediation	2.25%	8.10%	6.01%	3.75%	10.68%	7.91%
Real Estate Agencies and Business Services	6.96%	20.26%	9.00%	2.97%	6.69%	4.91%
Other Market Services	10.13%	28.37%	9.06%	55.80%	25.25%	7.19%
Non-market Services	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
	100%	100%	100%	100%	100%	100%

Value Added Structure and Employment

Value added structure [Table 2] reveals how more than 80% is accounted for by income distributed between employee compensation and the gross operating surplus. Notwithstanding, differences between these two items can be appreciated within each leisure port.

The gross operating surplus is not as important an item, as can be observed in Table 2, as it would be in any other type of company, due to the non-profit-making nature of yacht clubs. In fact, it is even negative in the case of Denia Yacht Club, “Marina de las Dunas” and Santa Pola Yacht Club. Another feature of this type of organisation is that they are subsidised by the government, which means quite low or even negative net indirect taxes (Royal Yacht Club of Valencia, Les Bassetes Yacht Club, “Marina de las Dunas”, Royal Yacht Club of Torrevieja).

In the majority of facilities, the most important item is wages. As these organisms do not share profits, employee wages are more important than the rest of the items that make up value added. However, in the case of Oropesa Yacht Club, the Royal Yacht Club of Valencia, Denia Marina and the Royal Yacht Club of Torrevieja, both employee wages and the gross operating surplus are relevant.

Employment information is somewhat disguised by the fact that yacht clubs subcontract services, as can be appreciated in the information referring to the purchase of services. On many occasions, such services are hired on a personal basis and as a result are not clearly portrayed in the situation of marinas or the companies that provide the services. Identifying such services remains difficult because they are not recorded as employment by the port or the services company.

Table 2: Nautical Facility Value Added Structure (2004)
	OROPESA YACHT CLUB	R.Y.C. of VALENCIA	DENIA MARINA	DENIA YACHT CLUB	LES BASSETES Y.C.	MARINA DE DUNAS	R.Y.C. of TORREVIEJA	SANTA POLA Y.C.	ALTEA YACHT CLUB	CAMPOAMOR Y.C.
Gross Wages	30.39%	47.38%	25.03%	112.18%	66.78%	106.01%	54.15%	113.92%	76.16%	78.97%
Operating Surplus	63.72%	31.05%	59.74%	-35.92%	20.49%	-4.39%	46.27%	-22.89%	17.91%	1.05%
Other Taxes	0.92%	16.22%	6.97%	17.14%	13.01%	1.46%	1.41%	2.91%	11.41%	8.72%
Net Indirect Taxes	4.97%	-5.35%	8.27%	6.59%	-0.28%	-3.08%	-1.82%	6.06%	5.48%	11.26%
Gross Value Added mp	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%
Nº of Employees	23	73	14	41	11	22	40	39	24	11

Aggregate Effects of Leisure Ports

in the table presenting the aggregate effects of the Valencia ports, six variables are summarised: gross wages, gross operating surplus, tax income, gross value added at basic prices (GVAbp), output and number of employees, the results are detailed according to initial, direct, indirect and induced effects. Despite the differences between leisure ports, marinas and yacht clubs, [Table 3] includes the averages for all of them.

Some of the general features of the economic impact of marinas and leisure ports in the Valencia Region are detailed below:

The initial information obtained regarding the structure of these facilities denotes an average-sized company that purchases intermediate goods worth 967,000 euros, which exceeds their value added contribution.
Facilities have an important direct effect on the town due to both the quantity of purchases made and the value added generated, particularly where wages are concerned.
Indirect effects are minimal as this type of activity is not closely linked to local industry.
The induced effect, owing to the income generated, approaches the value of the indirect effect.
Total impact almost replicates the initial effect, which implies significant repercussions for the local economy.

Table 3: Average Economic Aggregates of the 10 Leisure Ports Analysed in the Valencia Region, 2004 (1,000s of euros)
	Initial	Direct	Indirect	Induced	Total
Gross Wages	529	292	20	185	496
Operating Surplus	276	316	18	156	490
Tax Income	106	19	1	13	33
GVA bp	898	616	39	347	1,002
Output	1,865	1,151	76	532	1,859
Nº of Employees	30	15	1	10	26

Nautical and sports activity demands a significant amount of services from the rest of productive sectors in the economy, giving rise to the so-called direct effect. This impact mainly captures how relevant the facility is with respect to its environment, which could be perceived by local companies as an indispensable producer of services that are necessary to maintain and increase their business activity. In all facilities, the direct activity they generate is more important to the rest of sectors than subsequent trade relations (indirect and induced effects represented in columns 4 and 5). In this sense, for example, the Royal Yacht Club of Torrevieja generates a total output amounting to 1,229,000 euros in order to meet the demand of the rest of the branches of activity, of which 737,000 euros are increases in income (GVA) and 21 new jobs are created. However, Campoamor Yacht Club, due to being smaller in size, also has a smaller direct effect on the rest of economic sectors. This impact implies a total output of 236,000 euros and three new jobs together with corporate profits amounting to 139,000 euros.

The indirect effect that stems from all the interaction that occurs in the productive structure is relatively small, but not inconsiderable. The reason the impact is cushioned so quickly is nautical-sports activities mainly use services, which create only minimal inter-sector links.

However, investors become more interested and consumption increases if we consider the spending of the income that leisure ports generate through their activity, employee compensation (wages) and companies (corporate profits) (induced effect). Results show that the induced effect is larger than the indirect effect, but smaller than the direct effect. A common feature in all the facilities under analysis is that the profits made through the induced effect are very similar to the gross wages obtained through the same effect. For example, in Altea Yacht Club, the induced effect generates a profit of 121,000 euros and gross wages of 143,000 euros. Likewise, Santa Pola Yacht Club faced with gross wages that amount to 132,000 euros, makes a profit of 111,000 euros.

Results Obtained in Italian Ports

Average direct, indirect and induced effects are presented below in aggregate form with respect to the main macroeconomic variables that determine the influence of the nautical activity carried out by the three facilities under analysis (Table 4). The results portray a similar pattern to that described for the marinas in the Valencia region.

Table 4: Average Economic Aggregates in the Three Italian Leisure Ports Analysed, 2004 (1,000s of euros)
	Initial	Direct	Indirect	Induced	Total
Gross Wages	435	38	474	148	622
Operating Surplus	487	85	572	393	965
Tax Income	1,084	180	1,264	822	2,086
GVA bp	796	114	910	512	456
Output	1,303	210	1,513	978	2,491
Nº of Employees	23	2	25	9	34

From the analysis made on the specific impact of the Italian ports, considered on the provinces where they are located, emerges that Porto Antico has the greatest impact on the rest of productive sectors in terms of the size of the effects as a whole. Furthermore, direct activity generated for the rest of sectors is more important than subsequent trade relations (indirect and induced effect) in all tables.

The direct effect, as explained previously, mainly echoes how important local companies perceive the nautical activity to be when it comes to meeting the demands of these types of facilities. In short, the structure of the facilities represented by purchases and identified in their column, generate significant direct economic activity among the rest of productive sectors. In the case of Porto Antico, this increase in demand boosts output by 2,941,000 euros, of which 1,805,000 are increases in income (GVA) and creates 53 new jobs. Lower results were obtained in Lega Nevale and Diano Marina as they are both smaller (output increased by 200,000 euros and 769,000 euros of which 123,000 and 459,000 were GVA respectively).

The indirect effect denotes the impact that stems from the subsequent buying and selling activity that takes place between the sectors originally affected by the activity of the facility under analysis and the rest of economic sectors. According to the results, this impact is smaller than in the case of the direct effect described above. Once again, the reason this impact is absorbed so quickly is due to the sports activity demanding mainly services, which have a minimal inter-sector linking effect. inally, the induced effect is generated by the consumption and investment power of companies and economic agents directly related to the activity of the marina. In this sense, considering the income obtained through local nautical activity, employee compensation (wages) and companies (corporate profits) stimulates the economy. In the case of the facilities in Italy, the induced effect of Porto Antico boosts output by more than 2,200,000 euros and produces GVA amounting to slightly over 1,150,000 euros, as well as creating 20 additional jobs. In Lega Navale and Diano Marina, the induced effect raises output by 151,000 and 568,000 euros, GVA to the value of 79,000 and 297,000 euros and created one and five new jobs respectively.

The total impact of each facility on the economy of the province indicates that such infrastructures are not very important as they are extremely small when compared to the size of economy in the province where they are located. This is the case of Genova, a province that is responsible for nearly 80% of the overall volume of economic activity in the region of Liguria. These results are the only ones that are not comparable to the facilities in the Valencia Region where we were able to obtain IOT for the various towns in which facilities are located. Towns are logically much more affected by such facilities. We can also see how the structure of facilities is quite similar, which gives an idea of how stable the analysis of the nautical facilities are.

Conclusions

The recent upturn in demand for nautical sports and the need for attractive facilities in tourist destinations has sparked an interest in evaluating possible investment decisions by analysing alternatives that will have an impact on the Valencia and Italian economy.

This study has made it possible to determine how important some Western Mediterranean nautical-sports infrastructures are in the towns where they are located using data for 2004. It is worth bearing in mind that such facilities are growing continuously to meet user demand and offer an increasing number of services (restaurants, shops, central office, nautical and fishing schools, swimming pools etc.) as the current level of competition makes perfecting all activities undertaken a must.

According to the results of the study, the facility that contributes the most to GVA (GDP) in its respective area is the Royal Yacht Club of Valencia (3,087,000 euros), followed by Denia Marina (1,489,000 euros). However, the size of the city where the port is located is decisive when it comes to evaluating the overall impact (initial plus total effects) on the area under study. Such is the case of the Royal Yacht Club of Valencia, which despite being the largest facility has a minimal impact on the city of Valencia (0.04% of Valencia GDP). The opposite occurs in the case of the Oropesa Yacht Club, which despite being a relatively small facility, accounts for 2.58% of Oropesa GDP.

As regards the facilities in Italy, the economic impact of Porto Antico boosted direct output by 2,941,000 euros, of which 1,805,000 were increases in income (GVA), and created 53 new jobs. Lower results were obtained in the cases of Lega Navale and Diano Marina due to them being smaller in size (increases in output of 200,000 and 769,000 euros, of which 123,000 and 459,000 euros were GVA respectively).

The results obtained from the impact analysis highlight the fact that Input-Output Analysis is a good tool for evaluating how important the internal activity of a port area is and its repercussions on the region. Furthermore, in order to avoid the strictly linear nature of the model applied, specific matrices were used for the year and the region or town under study, thus improving data manipulation and consequently results.

Direct effects are highly relevant in nearby areas from which leisure ports obtain supplies. In contrast, apart from other effects such as attracting recreational and sports tourism, the indirect effects that are strictly economic are not very significant, while the effect induced through ports creating household wealth is again considerable in the town or region where the facility is located. Despite having a lesser impact, the indirect and induced effects are felt by all branches of productive activity and above all are evenly spread across productive factors, labour and corporate profits.

In line with the research conducted under the Interreg IIIC initiative, Ruiz^[3] concludes, from a strictly tourist viewpoint, that while it is true that nautical activity has many appealing aspects in terms of diversifying and specialising the tourist activities on offer, the high level of expenditure that it brings and how appealing the activity and the facility are, it also increases the residential tourism share of accommodation supply along the Valencia coastline. This must be taken into account when evaluating how profitable it is to fill vacancies with this type of tourism, as it may turn out to be less profitable than commonly expected.

References

↑ La Caixa (2005): Anuario Económico de España.
↑ ISTAT (Instituto Nazionale di Statistica (2005): Contabilità Regionale Italiana.
↑ Ruiz, P (2005): “Estudio del impacto socioeconómico” Proyecto Gesinports: gestión integrada y sostenible de los puertos de recreo del Mediterráneo.

This a revised extract from the author's contribution to the Encora Theme 1 Thematic network conference in Venice, March 2007. Please refer to Conference web page for the complete paper.

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 [[Category:Coastal and marine tourism and leisure]]
 [[Category:Practice, projects and case studies in coastal management]]
+[[Category:Integrated coastal zone management]]

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