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Rural Tourism Impact in Local Economies - Proportional Income and
Employment Multipliers (The case of Douro Region)
Francisco Diniz
DES/UTAD
1 - INTRODUCTION
At a global level and within the diverse rural economies of Europe, there is a widespread
recognition of restructuring pressures, which are creating significant adjustment needs.
These pressures for rural restructuring stem from political, economic and environmental
causes.
The General Agreement on Tariffs and Trade (GATT) agreement reflected the greater
global commitment towards more free trade in all products. In addition, there is a
growing political commitment, which has been evident in a wide range of developed
western economies, to enable market forces to operate more freely.
In general, there have been tendencies towards overproduction of many primary
commodities resulting from the nature of farm production and the political support
which has cushioned farmers in many parts of the world from the operation of free
market forces. Although there are lower stocks of food in the mid 1990s than at any
time in the previous 20 years, most commentators regard this as a 'blip' rather than a
counter-trend asserting itself.
The concern about environment is increasingly being embodied into policy. The
Agenda 21 of Rio and the development of agri-environmental policy in the EU were
both reflections of a growing recognition of sustainability as an issue that cannot be
ignored.
In the debate about the future of the European rural economy, much interest has been
shown in tourism as a potential element of the future rural economy. This interest
reflects a widespread recognition that agriculture and other primary industries cannot
sustain the existing populations of many rural areas at an adequate standard of living.
In addition, the recognition of a strong interest in the countryside from consumers for

Summer Institute 1999 “Tourism Sustainability and Territorial Organisation” Faro 5-9 July 1999
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both tourism and recreation, the growth in the service element of the rural economy,
and the fact that many of the attractions of the countryside are a function of past or
present land-based activity have focused attention on the economic possibilities for
rural tourism in general and farm (and other forms of land-based) tourism in
particular.
The importance of the human activity in creating rural landscape values in Europe is
widely recognised. The significance of Kulturlandschaft and patrimoine as terms in
other European countries reflects the deep symbolic attachment of a predominantly
urbanised population to its rural roots. However, these humanised and highly diverse
cultural landscapes are under threat from diverse forces, including agricultural
intensification, urbanisation and, in disadvantaged areas, from desertification and a
dramatic thinning out of the rural population. Because the amenity goods being
provided by the cultural landscape are public goods, it is difficult for the provider to
be rewarded for their provision, although the European Union now offers support for
national agri-environmental policies under EC Directive 2078/92.
Given the depth of the crisis facing European agriculture in particular and the
generally disadvantaged nature of many rural regions, it is unsurprising that so many
should have looked to tourism as a lifeline for these disadvantaged areas. However,
there is clearly a gap between the rhetoric of policy makers and other commentators
who see major scope for land-based tourism and the reality, which often comprises
strongly negative attitudes to tourism, especially amongst productionist-oriented
farmers, even where there is a clear touristic opportunity. In addition, it might be
asserted that there are large areas of Europe where there is, at best, only very modest
scope for seeing rural tourism as a viable adjustment strategy for most rural
households.
This paper deals with part of the out-come of a European resarch project funded by
the E.U. Commisionn between 1993-1996 within the AIR-Programme (Contact Nr –
AIR CT92-0447) “Synergetic Pluraictivity – The Development of Agrotourism
Related Activities as an Adjustment Strategy for Disadvantaged Rural Areas”, in
which researchers from Portugal (University of Trás-os-Montes and Alto Douro Vila Real); United Kingdom (Scottish Agriculture College – Aberdeen); and France
(Institut d’Études Politiques – Grenoble) took part.
2
One of the case study areas in this study, Douro in northern Portugal, offers a potent
symbol of how tourism can develop in rural economies. Amoung others a British
travel firm offers exclusive river cruises up the Douro valley. The advertising images
relate almost exclusively to the cultural landscape of the region of terraced valley
sides, viticulture and rural buildings. Thus the landscape provides an essential
component of the experience but only occasionally on the trip does the visitor enter
this landscape physically when he leaves the cruise ship. The benefits accruing to the
providers of that landscape are minimal. Neither do the providers of this holiday
experience provide significant indirect or induced benefits to the rural economy, for
almost all their requirements of inputs are satisfied in Porto, a major urban centre
outwith the region. The travel firm's behaviour represents an entirely justifiable
attempt to exploit a market opportunity by the firm but, at another level, provides a
classic illustration of the parasitic nature of much rural tourism.
However, there is a strong case for exploring more fully the wider repercussions of
different styles of tourist development. There is a need to consider what are the most
appropriate forms of economic analysis to examine the impact of tourism on the
recipient rural economies. The potential types of economic analysis include:
•
demand studies
•
supply studies
•
demand-supply interactions
•
economic impact studies
The objective of this paper is to explore the economic linkages between land-based
businesses involved in tourism and the wider local and regional economies in which
these businesses are located. The local and regional economic impacts arising from
tourism activity can be broken down into two component parts. First, there will be
impacts arising from the development of the enterprise. Second, the economic
impacts arising from the on-going operation of the tourist enterprises can be
explored. Whilst recognising the importance of what might be termed the investment
multiplier, especially during periods when tourism provision is expanding, this paper
focuses on the economic repercussions arising from the day-to-day operation of rural
tourist enterprises.
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In order to explore the economic ramifications of one type/style of tourism it is
desirable to have a benchmark against which to compare the particular type of
tourism under scrutiny. Tourism provision in rural areas has taken many forms in
different parts of Europe. In some areas there have been major tourism developments
based on, for example, ski-ing or purpose-built coastal holiday villages. In other areas
there is much more varied provision, including land-based tourist enterprises, small,
medium and large hotels and holiday villages and time-share developments. In other
areas there is a modest level of tourist provision. The economic impacts of land-based
(soft) tourism provision will be contrasted with local manifestations of conventional
hotel-based or other (hard) tourism.
This tremendous diversity of provision offers both an analytical challenge and an
opportunity. In exploring the economic impacts of different styles of tourism
development on the recipient local and regional economies, it would be easy to reject
any comparison between regions as meaningless. However, whilst direct comparison
of results arising from one region and another are very dangerous, it may be possible
to construct a picture of how different styles of rural tourism impact on very different
rural economies in different parts of Europe.
In different parts of Europe, rural tourism is at very different stages in its
development. Even in countries such as the UK, where there are long-standing
traditions of rural tourism provision by land-based businesses in some areas, there are
other areas where there has recently been a marked increase in rural tourism
provision, as the wider countryside has been increasingly seen as a tourism
destination, rather than the traditional coastal resort regions like the south-west of
England. In Portugal, in contrast, the level of involvement of land-based businesses
in rural tourism has traditionally been very low and there has been little involvement
until very recently. This is in spite of tourism having been a major component of the
Portuguese economy for a number of years and the existence of complex regulatory
structures and public interventions at a national level.
The Douro region is located in the north of Portugal, mostly included in the province
of Trás-os-Montes. It comprises the large geological bassin around the Douro river
and its affuents, that goes from Barca de Alva, in the spanish border and Barqueiros,
somewhere in the middle lenght of the Douro river in portuguese territory. In wide
terms, the limits of the Douro region, also known as Alto Douro region, are defined
in the link side of the river by the Marão mountains and in the right side by the
Montemuro mountains.
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The specific features concerning the climate, geology and edaphology play an
important role in the mesological characterization, because they determine particular
environmental conditions and form a well defined regional unity, which has a special
relationship with the Port wine production area, the Douro Demarcated Region.
The wine production was highly developed around 1654-1678, as a consequence of
the English market's demands in terms of fortified wines. Back then, the English
traders established in Portugal exported Port wine for all parts of the world,
especially England, under the Methwen Treaty (1703). In order to help Portuguese
wine producers and tradesmen ensure the quality and the reputation of the wine, the
Prime Minister Marquis of Pombal founded the General Company Of Agriculture
And Vineyards Of Alto Douro in 1756. Due to the crisis caused by an overproduction,
it was necessary to circunscribe the wine making to a restrict area along the River
Douro. Thus, Pombal prevented the wines from other regions from competing with
the ones from Douro. He even had some vineyards from other regions pulled out. The
area thus delimitated corresponds to the Douro Demarcated Region (DDR) and it is
considered the world oldest demarcated wine region.
Presently the DDR covers about 250000 ha, divided by 16 concelhos1. For this study,
we have selected the 102 of them integrating the Douro Histórico Association, an
association whose aims are, among others, the promotion of local development
initiatives. In this context, the association is presently implementing a project under
the LEADER program.
2 - METHODOLOGY
Multiplier analysis has been used on a number of occasions to examine the economic
implications of tourism development (Archer 1973; Henderson and Cousins 1975;
Coppock, Duffield and Vaughan 1981; Surrey Research Group 1993). The economic
effects of tourist expenditure are particularly complex because they occur at a number
of levels and in a wide range of businesses.
Three levels of effect are distinguished: direct, indirect and induced. Tourists spend
their money in businesses in an area which creates direct revenue. A proportion of
this revenue is used to pay for supplies. The income that remains, once all inputs
have been accounted for, comprising wages, salaries and profit, is known as the
1
Concelho is an admnistrative unit corresponding to the municipality level.
2 Vila Real, Sabrosa, Alijó, Stª Marta de Penaguião, Pêso da Régua, Mesão Frio, Lamego, Tabuaço, Armamar e
S. João da Pesqueira.
5
direct income. Similarly, direct employment is the number of people whose
employment is directly linked to tourist spending.
The purchases of direct businesses from other businesses (suppliers) give rise to the
indirect effect. Income that is retained with these suppliers, and their suppliers, after
inputs are paid for, is the indirect income. Employment in these businesses resulting
indirectly from tourist expenditure is known as the indirect employment.
The third type of effect, the induced impact, results from the respending of wages and
drawings earned directly or indirectly from tourism within the local economy. The
income of local people rises due to income arising from tourist expenditure, and
purchases which are made from local businesses add to the income and employment
that is generated from tourism, thus generating induced income and induced
employment.
Spending by tourists therefore has a ripple effect in the local economy. Multiplier
analysis takes these effects into account, providing a measure of overall economic
impact of the tourism industry and the short-run effects of changes in output i.e.
tourism expenditure. However, interpreting multiplier values should be undertaken
with extreme care. They have been subject to misunderstanding and abuse in the past
(Fletcher and Archer 1988). Much of this arises from the variety of multiplier values
that can be estimated, the different methods that can be used and the variations in
their expression.
There are four principal types of multiplier:
1.
Sales/ transactions multiplier - this measures the relationship between tourism
expenditure and economic activity of the economy i.e. business turnover.
2.
Output multiplier - this is very similar to the sales multiplier, except that it takes
into account not only the increase in sales (business turnover) but also any
changes in stocks. It therefore measures the effect of tourism expenditure on the
level of output of the economy.
These two multipliers have limited use as policy planning tools, as they only provide
an indication of sectoral dependence in the economy associated with tourism. The
output multiplier can also predict the potential output consequences from a change in
tourist expenditure. This can be useful in identifying potential supply shortfalls, or
bottlenecks.
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3.
Income multiplier - this is commonly regarded as the most important indicator
of the economic performance of a tourism industry. It measures the relationship
between tourist expenditure and the resulting level of income in the economy,
including wages, salaries and profit. It can be measured in two ways: disposable
income - the income available to individuals to spend or save which is net of
tax; value added income which includes tax and other expenditures which are
defined according to national income accounting rules.
The importance of the income multiplier arises from its usefulness to planners and
policy makers. It can demonstrate the economic impact of each element of tourist
expenditure by industrial sector. This enables the relative benefits of different types
of tourist activity to be compared. These can then be targeted to maximise the
economic benefits accruing to an area from tourism.
4.
Employment multiplier - this relates employment to tourist expenditure.
Employment can be measures in terms of full time equivalent jobs, or the actual
number of jobs including part-time jobs. Both provide valuable information
about the labour requirements of the tourism industry in terms of quantity and
type of job.
Each of these multipliers can be expressed in several ways. Type 1 multipliers refer
to multipliers which exclude the induced effect. These are used because the induced
effect is often small in comparison to the direct and indirect effects, and can be more
difficult to estimate. Type 2 multipliers include the induced effect.
Multipliers are essentially ratios, and the divisor can vary, giving rise to the 'orthodox'
or 'proportional' multiplier. The orthodox, or conventional, multiplier is given below:
Type 1:
direct + indirect effects
Type 2:
direct effect
direct + indirect + induced effects
direct effect
This will produce multipliers which are greater than one, and the greater the value of
the multiplier, the stronger are the linkages between the different sectors of the local
economy. The orthodox Type 2 employment multiplier is particularly useful as it can
be used with data relating to direct employment, which are often available, enabling
indirect and induced employment effects to be predicted.
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However, the orthodox multiplier is of limited use to planners and policy makers
because they do not immediately reveal the level of investment, i.e. tourism
expenditure, which is required to create a given effect. This is given by the
proportional, or unorthodox, multiplier, in addition to indicating the strength of local
economic linkages. A further advantage of the proportional multiplier is that it is a
simple operation to calculate the orthodox multiplier if required. The reverse is
significantly more difficult. The proportional multiplier is given below:
Type 1:
direct + indirect effects
Type 2:
tourist spending
direct + indirect + induced effects
tourist spending
This gives results which are less than one. The greater the value of the multiplier, the
greater is the retention of tourist spending in the local economy.
This variety of types of multiplier, and the variation in expression, can lead to
confusion in interpretation and makes comparisons between studies very difficult. In
addition, there are a number of other constraints associated with multiplier analysis
which have to be considered. These are discussed in the next section.
2.1 - Constraints of Multiplier Analysis
The assumptions of multiplier analysis give rise to a number of constraints which
have to be taken into consideration in the interpretation of multipliers. Firstly, the
methodology was devised to measure the impact on an economy of a change such as
an increase or decrease in investment. In this study it measures what happens when
there is a change in tourist spending. It would be expected that the coefficients that
are used are those that occur at the margin. However, due to difficulties in estimating
coefficients at the margin, average values are used, and it is assumed that there is no
significant difference between them. This implies that the economy has available
capacity to meet future tourism demand. This may not be the case. For example, an
increase in tourism demand may be accommodated by an increase in imports relative
to local production due to local production constraints. This will reduce the
multiplier. Where this is likely to be the case, it is possible to adjust the results to
produce more realistic values.
The data that are used as the basis for the multiplier analysis necessarily reflect the
characteristics of the local economy under consideration, at that particular time. This
places constraints on the applicability of multiplier values to other areas, and over
time, because the local economy will be different. An additional consideration is that
8
the effects of tourism expenditure take time to ripple through the economy. Thus the
estimation of indirect and induced impacts in present values will not be truly
representative of the future value when they actually take place.
It must also be kept in mind when interpreting multiplier values that they are ratios,
and therefore reveal nothing about the value of tourism to a local economy. For this
to be assessed, the multiplicand, i.e. the total level of tourist expenditure, has to be
considered as well.
Another criticism of multiplier analysis is that it does not represent the full picture
of the impacts on the local economy of tourism. It does not try to account for the
costs of tourism to the local economy, especially negative external costs, and
therefore presents an incomplete picture. However, this is not always made clear by
advocates of tourism who use multiplier values as evidence that tourism is
economically beneficial, and a source of employment for the local/regional economy.
Taking these constraints into account, multiplier analysis remains a powerful and
valuable tool for analysing the impact of tourism on a local economy. It is able to
provide data exploring the interdependences that exist between the different sectors
in the local economy. Detailed information can also be produced about different types
of business and visitor to aid planners. The information available is also invaluable
for institutions which are planning investment into an area which wish to assess the
economic impact of their proposed actions.
The estimation of multipliers is also affected by the methodology which is used to
estimate them. The next section describes the competing methods that are most
commonly used.
9
2.2 - Competing Multiplier Analysis Methodologies
The concept of the multiplier was developed principally by Kahn and Keynes (Ryan
1991). Keynes identified two flows of economic activity that affect economic growth.
These are:
•
injections into the economic system - including government expenditure, exports,
investment and consumer spending. These create jobs and income.
•
leakages - these result in a loss of income and jobs from the local economy and
include savings, taxation and imports of goods and services.
The essence of the multiplier is that an injection into the economy will lead to an
increase in income over and above the initial injection. The magnitude of the increase
is dependent on the rate of leakage. Leakages are derived from the marginal
propensity to consume (c) and the marginal propensity to import (m):
multiplier =
1
leakages
=
1
1-c+m
This equation forms the basis for Keynesian multiplier analysis. Methodologies based
on this equation benefit from its simplicity, but are also limited because aggregation
can lead to inaccuracy. The assumption of this method is that all sectors of the
economy are subject to the same values of (c) and (m). However, differences do exist
between sectors, and practical application of this methodology requires further
disaggregation and complexity.
This disadvantage of Keynesian multiplier analysis can be overcome through the
application of input-output analysis. This methodology has been principally
developed by Leontief as a simplification of earlier work by Walras. Leontief's model
allows the outputs and inputs between industries to be estimated. It is fully
compatible with Keynesian multiplier analysis and can be considered as a Keynesian
system which incorporates the production of intermediate goods (Fletcher and Archer
1988).
Input-output analysis is based on the input-output table, also known as the
transactions table. This is a table of productive sectors (horizontal), and consumptive
10
(vertical) sectors. Thus the rows represent output, or sales, and the columns represent
purchases. The input-output table is a useful economic tool on its own. One of the
first applications of this theory was to construct a table for the whole US national
economy, based on the transactions between 450 industrial sectors. This was used by
the US government in planning economic reconstruction after the Second World War
(Leontief 1951).
In order for the input-output table to be useful as an economic model, it is necessary
to mathematically transform the data into coefficients. The cells in a column, which
represent the purchases of a sector are divided by the column total. Each cell
therefore equals the proportion of inputs purchased from each source of intermediate
goods and services, and primary inputs. The sum of the column is one. The
transformation of the table uses a mathematical procedure known as the Leontief
Inverse. The resulting total requirements matrix is the total direct and indirect effect
produced by a change in demand.
Input-output analysis overcomes the problem inherent in the Keynesian multiplier
analysis in that it allows for variations between sectors. However, as mentioned in
Section 3.1, the model makes use of average not marginal propensities to consume,
and assumes negligible differences in between them. Assumptions also have to be
made about the production functions of the industrial sectors, and the consumption
function of households. These are taken to be linear and fixed. The major
disadvantage of input-output analysis is the detailed data requirements which make it
very expensive to carry out.
Advantages of input-output analysis include:
•
it provides a comprehensive view of the whole economy,
•
it highlights the interdependencies between different sectors in the economy,
•
it is flexible and can be easily modified to extract detail where required and
reduce detail where it is not required,
•
it is policy-neutral and objective,
•
it enables economic impacts to the studied at the direct, indirect and induced
levels.
11
These advantages of input-output analysis make it a powerful and comprehensive
tool for studying the economic effects of an industry such as tourism (Fletcher 1989).
However, the costs of full input-output analysis mean that relatively few studies have
been carried out. A more common approach has been developed for studies of
tourism which combines a modified form of input-output analysis with traditional
Keynesian multiplier analysis. This approach, known as ad hoc or proportional
multiplier analysis, was initially developed by Archer (1973) in a study of Anglesey,
North Wales, and substantially developed by Henderson and Cousins in a study of
Greater Tayside (1975). More recently, this methodology has been modified and used
extensively by Vaughan (various studies including 1981; 1987; 1991; 1992; 1994).
This methodology estimates the direct and indirect effects of tourism spending using
a 'partial' input-output model which concentrates on tourist-relevant industries and
tourist spending. The input-output table is therefore based on a reduced set of
businesses, reducing the data requirements and the consequent costs of the study. The
induced effect is estimated using a modified Keynesian multiplier analysis, rather
than including household consumption as part of the input-output table.
The disadvantages of this methodology are that it is subject to the same assumptions
as full input-output analysis and, in addition, there is a degree of subjectivity which
arises from the selection of businesses which are thought to be relevant to the
analysis. This subjectivity has been largely overcome as the methodology has been
more widely used.
The advantages of proportional multiplier analysis are that it retains the detail of
input-output analysis relevant to tourism and it is more cost-effective to carry out. It
is also possible to use the methodology to estimate the sub-regional, as well as the
local impact of tourism (Coppock, Duffield and Vaughan 1981). The results are
usually expressed as a ratio of visitor spending (proportional multipliers) which, as
discussed earlier, are more useful and relevant to planners and policy makers.
3. DATA COLLECTION
3.1 Data Entry for Business Activities
The data regarding business activities were collected by taking into consideration visitor
expenditures. Although some of the data related to accommodation units, either Hard or
Soft, was already obtained last year, we have also done further interviews of these type of
businesses in 1995. All the data concerning other types of businesses (apart from
accommodation) in which tourists spent their money, came from interviews made in 1995.
12
The number of business activities from the interviews in Douro either in Core or in
Extended areas.(Two levels of geographical analysis are also used in this study the core area
and the extended area. The latter includes the core area and the area within 25 km of the core
area boundary, including important service centres. Figure 1 illustrates the economic flows
between the core and extended areas, and the wider national economy).
Extended Area
Core Area
Key:
Inputs of goods and services to the economy
Financial leakages as payments for inputs
Circulation of inputs and payments within the economy
Figure 1 - Economic flows impacting upon the Core and Extended Areas
The business survey data had to be entered into the enter file and to each file was given an
appropriate name (See Table 1). Some of the businesses used both Direct Businesses and
Suppliers in the Core Area. In the Douro region this is the case for the following activities:
Drinks (2); Supermarket (1); Repairs (1); and, Petrol (2).
13
Table 1 - ENTER FILES FOR MULTIPLIER ANALYSIS - PORTUGAL
Model Filename
DOURO
Business type
Number
Direct Business
Enter 1
Hotel
Enter 4
Cruise
Enter 5
TER
Enter 9
Clothes
Enter 11
Quiosque
Enter 13
Craft
Enter 14
Jewellery
Enter 18
Drinks
Enter 19
Supermarket
Enter 20
-Enter 21
Sausage shop
Enter 22
-Enter 25
Restaurant
Enter 27
Leisure
Enter 32
-Enter 33
Petrol
Enter 34
Repair
Suppliers in the Core Area
Enter 35
Supermarket
Enter 36
Drinks
Enter 38
Repairs
Enter 39
Petrol
Enter 40
-Enter 41
-Suppliers in the Extended Area
Enter 42
-Enter 47
-Businesses for the Family Expenditure Survey
DOURO
Enter 49 - Food
Drinks/Supermarket/Sausage
Enter 50 - Clothes
Clothes
Enter 51 - Housing
Same as Enter 56
Enter 52 -Household Goods
Repairs
Enter 53-Medical Expenses
Same as Enter 56
Enter 54 - Transport
Petrol
Enter 55 - Culture
Leisure/Quiosque
Enter 56 - Other Goods
Restaurant/Jewellery/Craft/
Quiosque/Hotels/TER
Enter 57 - Other
Same as Enter 56
4
1
14
1
1
2
1
2
1
-3
-2
2
-2
1
1
2
1
2
-----
3.2 Number of Visitors
As a starting point, we have the total number of bednights provided by the businesses
sampled. We collected data relating to the previous 24 hours (including the total number of
bednights, which equals the total number of providers questioned). In order to calculate
14
bednights occupied over the survey period in each accommodation site (Soft and Hard units)
in our questionnaire, we have also asked about the occupancy rate. This figure and the total
number of bedspaces available allows us to calculate the number of bednights sold by the
accommodation sector in the Core area during the survey period, including businesses which
were not included as sampling sites. The total number of bedspaces available was derived
from either the tourist board publication or leaflets produced by each accommodation unit.
The number of visitors is calculated on the basis of the total number of bednights sold by the
accommodation sector, divided by the average length of stay.
3.3 Family Expenditure Survey and Local Expenditures made by Households
In order to calculate sample family expenditure for both study areas, we consulted the
Inquérito aos Orçamentos Familiares for 1989/1990 , which is the latest available survey
published by Instituto Nacional de Estatística. The family expenditure structure for the
Northern Region of Portugal was as follows: • Food, Drink, and Tobacco - 37.3%; •
Clothing - 9.7% • Housing Heating and Electricity - 12.9%; • Household Goods - 6.9%; •
Medical Care and Health - 2.6%; • Transports and Communications - 13.1%;• Culture and
Education - 3%; • Other Goods and Services - 11.5%; • Other Expenditures 3%.
We used data from the Northern Region, as Douro is a sub-region that is a part of it , and no
data was available for smaller geographical units. Due to the absence of published data on
the amount of local expenditures made by households, estimates were made on the basis of
well-informed guess work .
3.4 Data Adjustments
Some adjustments had to be made in the case of the ENTER FILES. Most of the data
collected from businesses were obtained from the business tax retrurns submitted by each
enterprise when paying their taxes.
The Currency Index that we adopted is the September 1994 exchange rate of 190 Portuguee
Escudos to the ECU (XEU).
As all the data has to be relate to September 1994, some adjustments had to be made in
terms of the Price Indices valid for the various periods when the surveys were carried out.
The Price Index was taken from Quadro1 of Índice de Preços no Consumidor (see Table 2).
Table - 2 - Index Price - Monthly variation - month n/month n-1(%)
JAN
FEB
MAR
APR
MAY JUN
15
JUL
AUG
SEP
OCT
NOV
DEC
1994
+0,8
+0,6
+0,2
+0,6
+0,2
+0,2
+0,2
+0,2
+0,2
+0,4
+0,2
+0,3
Source: Índice de Preços no Consumidor - Base 1991, INE, Março/1995
4. INTERPRETATION Of THE RESULTS
The Proportional Multiplier Methodology enables us to interpret the results of the economic
impact of two different types of activities related to Hard and Soft tourism. To date, we have
only interpreted the results of the Douro region.
As we have already made clear, in the Douro region, we consider as Hard tourism the
activities of hotels and river cruises, and as Soft tourism the activities of Turismo no Espaço
Rural (TER).
4.1 Types of results
There are three different types of results: values expressed (a) per PTE 19000000
(equivalent to XEU 100,000) of expenditure, (b) per 100,000 days/nights and (c) the actual
total amount spent. All of these have been expressed in relation to Core, Extended, and Core
+ Extended areas, and in each area in terms of Hard and Soft tourism.
The local income results are presented according to three different categories of effect:
direct, indirect and induced. Another way of presenting the local income provided by the
impact, is by business type: accommodation, shops, restaurants, attractions and others. The
direct income shows also the factor incomes accruing to land, capital and labour, from which
conclusions regarding wages, drawings, additions to capital and rents can be drawn
The workforce is presented in two different ways: unstandardised and standardised, which
can be analysed taking into consideration several factors: type of accommodation in Hard
and Soft tourism, stages of impact (direct, indirect and induced) and per business type:
accommodation, shops, restaurants, attractions and other. The composition of the direct
workforce, unstandardised, can be observed in terms of gender; full time, part-time or
casual; employer (owner) and employee (all year or seasonal).
4.2 Brief Discussion of the Model Results for the DOURO Region
We will begin our analysis with the impact in the Local Income whose origin is the Visitor
Spending. For all three different types of results a Hard tourist will generate relatively more
Local Income in the Core Area, than a Soft one. Taking into consideration the situation
obtaining in the Extended Area we can observe the opposite. However, this is not enough to
require any alteration to the above-mentioned typology of income generation due to Visitor
Spending (see Table 3) .
Table - 3 - Local Income (%)
CORE AREA
EXTENDED AREA
CORE+EXTENDED AREA
HARD
4,0
49,8
45,8
16
SOFT
40,0
5,2
45,2
Source: Own calculation.
When the analysis is based on the Visitor Spending per 100,000 days/nights, one can clearly
see that Soft tourists spend more per day/night than Hard ones, which means PTE 13,40694
against 11,5998, respectively. If we observe the Total Economic Impact of Visitor Spending
it is possible to say something about the length of the stay : it is roughly twice as much for
the Soft compared with the Hard tourist. Hard tourists stay in the region, on average, 2.02
days/nights and Soft tourists 4.07.
The Total Economic Impact of Visitor Spending is derived from a total number of 24674
Hard tourists and only 939 Soft tourists, respectively. As we can see, this generates almost
the same Total Visitor Spending, allowing us to conclude that to achieve the same target for
Visitor Spending, we would eed to have 23,3 times more Hard than Soft tourists.
If we consider the Local Income Stage of Impact in term of direct, indirect and induced
effects, it is clear that in the Core area, the direct effect is the most significant one for both
types of tourists. In the Extended area, we can only find indirect impact, therefore, for the
Core+Extended area, the situation is the same as in the Core (see Table 4).
Table - 4 - Local Income Stage of Impact (%)
HARD
DIRECT
CORE AREA
EXTENDED AREA
CORE+EXTENDED AREA
INDIRECT
SOFT
INDUCED
DIRECT
INDIRECT
INDUCED
91,9
3,2
4,9
90,6
4,2
5,2
0
100
0
0
100
0
84,5
11,0
4,5
80,2
15,2
4,6
Source: Own calculation
The direct income can also be analysed in terms of land, capital and labour factors incomes.
For Hard and Soft tourism, disposable income (Wages + Drawings) represents 77,1% and
81,4% respectively . The retained income (Addition to Capital + Rent) is more significant in
Hard than in Soft tourism, which means that the Hard tourism entrepreneurs pay more
attention to the continuity of their businesses than the Soft ones (see Table 5).
17
Table - 5 - Direct Income composition (%)
HARD
SOFT
ADD.
WAGES
CORE AREA
EXTENDED AREA
CORE+EXTENDED AREA
DRAWINGS
ADD.
CAPITAL
RENT
WAGES
DRAWINGS
CAPITAL
RENT
33,9
43,2
16,5
6,4
41,9
39,5
15,4
0
0
0
0
0
0
0
3,2
0
33,9
43,2
16,5
6,4
41,9
39,5
15,4
3,2
Source: Own calculation.
When we look at Visitor Spending distribution by type of businesses, accommodation is the
most significant sector followed by restaurants, either in Hard or Soft tourism. Attractionsbased spending is negligible in both types of tourism, which shows the inability of the region
to encourage tourists stay longer (see Table 6).
Table 6 - Visitor Spending Distribution by the Different Types of Businesses (%)
ACCOMMODATION SHOPS
RESTAURANTS
ATTRACTIONS
OTHER
HARD
48,8
18,9
20,3
1,6
10,4
SOFT
58,4
10,2
14,5
1,9
15,0
Source: Own calculation .
Another aspect that may deserve our attention is the Workforce generated by Visitor
Spending. With, for example, Visitor Spending equivalent to XEU 100,000 in the Core area,
the employment generated by Soft tourism is much greater than that generated by Hard
tourism (see Table 7). The importance of wages in the Direct Income generated by Hard
tourism is almost one quarter less than for Soft tourism.
The Extended area doesn't play a meaningful role in terms of workforce generation. We
would also like to point out that namely in the case of Soft tourists, the reason why they
create much more unstandardised jobs than standardised ones is because in Soft tourism,
seasonal employees represent almost 30% of the total, while in Hard tourism this figure is
7%.
Table 7 - Workforce generate per Visitor Spending equivalent to XEU 100,000 1
HARD
SOFT
UNSTANDARDISED STANDARDISED UNSTANDARDISED STANDARDISED
CORE AREA
5,3
4,8
15,4
10,3
EXTENDED AREA
0,5
0,5
0,6
0,6
CORE+EXTENDED AREA
5,8
5,3
16,0
10,9
Source: Own calculation.
If we analyse the standardised workforce's direct, indirect and induced effects in Core area
and Extended area, the direct effect is the most important in the Core area and the indirect
effect is more important in the Extended area, for both types of tourism (see Table 8).
1
Standardised employmet is equivalent to the number of full-time equivalent jobs (or FTEs)
18
Table 8 - Standardised Workforce Direct, Indirect and Induced Effect
HARD
DIRECT
CORE AREA
INDUCED
DIRECT
INDIRECT
INDUCED
77,0
4,1
18,9
89,5
2,4
8,1
0
96,5
3,5
0
96,4
3,6
70,4
12,0
17,6
84,7
7,4
7,9
EXTENDED AREA
CORE+EXTENDED AREA
INDIRECT
SOFT
Source: Own calculation.
The importance of the Core area is just as relevant when workforce distribution by type of
businesses is taken into consideration: it is always above 85%, and no noticeable differences
can be discerned when we compare Soft and Hard tourists.
Hard
Seasonal
Em ploy ee
7%
Soft
Owner
12%
Seasonal
Em ploy ee
29%
All Year
Em ploy ee
81%
Owner
29%
All Year
Em ploy ee
42%
Figure 2 - Composition of Direct Workforce by Seasonal and Yearly Employment
Regarding the composition of Direct Workforce by Seasonal and Yearly Employment, both
owners and the level of seasonal employment play an important role in Soft tourism. All
Year Employment represents a little more than 80% of the Total Employment in the Hard
Sector (see Figure 2).
19
Hard
Soft
Male PT
Casual
3% !%
Casual
14%
Male FT
38%
Female FT
57%
Male PT
11%
Male FT
19%
Female FT
41%
Female PT
1%
Female PT
15%
Figure 3 - Composition of Direct Workforce by Sex and Part-time and Full-time Employment
The Composition of Direct Workforce by Sex and by Part-time and Full-time Employment
shows us that the Female Workforce is the most important both for Hard and in Soft tourism,
representing about 60% of the total Workforce. Part-time and Casual work is largely
irrelevant for Hard tourism (5%) but reaches 40% in the case of Soft tourism (see Figure 3).
Finally we would like to comment on the Interpretation Sheets. The comparison between
Soft and Hard could generally be made using a ratio of the comparative performances of the
two above mentioned types of tourism activities. If the ratio is <1, then Soft tourism's impact
is larger than that of Hard tourism. If it is >1, then the impact of Soft tourism is smaller than
that of Hard tourism.
In terms of Visitor Spending equivalent to XEU 100,000 Soft gives a greater impact in
Accommodation, Attractions and Other and a samller one when the busisses are Shops and
Restaurants.
When we analyse the Local Income generated by Visitor Spending equivalent to XEU
100,000, the situation in both the Core and Core+Extended Areas is that Hard tourism does
best in General business categories, while Soft performs better with regard to Attrations and
Other business categories.
When we observe the disposable income (Wages + Drawings) and the retained income
(Addition to Capital + Rent) that derives from Visitor Spending equivalent to XEU 100,000,
Hard tourism provides greater impact in both types of Direct Income in the Core area and for
all categories of businesses.
When (a) the unstandardised Workforce in both Core and Core+Extended Area and (b) the
Direct Employment in the Core area by type of business are taken into consideration, with
regard to Visitor Spending equivalent to either XEU 100,000 or 100,000 days/nights, Soft
tourism gives a greater impact in the business categories of Accommodation, Attractions,
20
Other and Total, while Hard tourism has a larger impact on Shops and Restaurants. As for
the Composition of the Workforce, Soft tourism's impact is greater for all categories.
In terms of 100,000 days/nights of Visitor Spending, Soft tourism has a greater impact in
Accommodation, Attractions and Other, and a smaller one when the businesses are Shops
and Restaurants; in the Total, Soft tourism gives a greater impact.
When we analyse the Local Income generated by 100,000 days/nights of Visitor Spending,
the situation both in the Core and Core+Extended Area is that Soft tourism generates most in
the category Total businesses, though Hard tourism peforms better in Shops and Restaurants.
When we observe the disposable income (Wages + Drawings) and the retained income
(Addition to Capital + Rent) that comes from 100,000 days/nights of Visitor Spending,
Hard tourism provides a greater impact on retained income in the Core area for all the
businesses, while Soft performs better in terms of disposable income. The reason why this
situation occurs is due to the relative wight of wage-payments associated with Soft tourist
spending.
In terms of the Total Economic Impact of Visitor Spending, though the ratio Hard/Soft was
always >1 for Spending, Income and for most Workforce categories (e.g. Owner, All Year
Jobs, Male Full-time and Female Part-time). We would again like to stress that these results
were calculated on the basis of 24674 Hard and only 939 Soft tourists.
5. FINAL REMARKS
There are a number of important dimensions of the socio-economic context of the
agricultural sector which merited our atention. First, there have been significant changes in
the nature of economic activity in many rural economies, often involving a diminished
contribution of the agricultural sector to regional well-being. Second, there have been
significant changes in agricultural policy, which have, for the first time in the history of the
CAP, fundamentally questioned its productivist ethos. These changes and associated
exchange rate fluctuations have created a high degree of uncertainty in the farm sector.
Third, there has been a growth in the service functions of agriculture (and rural land in
general), including the provision of environmental goods, tourism and recreation. These
changing roles of agriculture can be seen within a wider framework of policy change and
attitude shift in relation to environmental goods and tourism developments. Fourth, there
are signs that in policy implementation there are new ideas directing at least some
development strategies, replacing top-downwards strategies with partnership and bottom-up
approaches. Finally, the ambiguous and highly varied nature of the agricultural sector in
disadvantaged regions is recognised.
21
It is frequently argued that agricultural well-being is fundamental to rural prosperity. This
assertion was challenged by Wibberley (1981) many years ago, who noted that regions
dominated by agriculture tended to be characterised by weak rural economies. Not only was
their single dominant industry in long-term structural decline but also agricultural
intensification brought with it both labour shedding and environmental costs. Nonetheless,
others have pointed out the importance of agriculture because of upstream (input supplier)
and downstream (product processor) linkages. Wibberley's point was that, in the long run,
prospects for these regions were bleak because of their dangerous dependence on
agriculture, an industry which, in developed western economies would, under normal
circumstances encounter declining real incomes over time. This dependency was a sign of
weakness in spite of the relative prosperity of these areas in the short run. In spite of
these observations, the juxtaposition of strong agriculture and strong regional economies
still tends to underpin the ideologies of many agricultural interest groups (and rural
economists?)
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