New Zealand’s adaptation of a change in 2008 Tourism Satellite Account: Recommended Methodological Framework
Overview
The United Nations World Tourism Organization (UNWTO) has introduced a change in how tourism direct and indirect value added is derived, in 2008 Tourism Satellite Account: Recommended Methodological Framework (United Nations Statistics Division et al, 2008).
New Zealand has implemented this change, in line with the direct contact principle of having a strong economic link between the tourist and the supplier of goods or services. The effect of the change has resulted in a reallocation of some components of direct tourism value added to indirect tourism value added. The reallocation does not affect aggregated total tourism value added, which is unchanged.
Introduction to the new standard
The New Zealand tourism satellite account provides a summary measure of the contribution tourism makes to the New Zealand economy. It is consistent with and integrated into the New Zealand System of National Accounts, to provide data about the supply and use of tourism-related goods and services.
Furthermore, it is consistent with a conceptual framework for the design of the tourism satellite account prepared by the UNWTO with an intersecretariat working group made up of the United Nations Statistics Division, the Statistical Office of the European Communities, and the Organisation for Economic Cooperation and Development.
In parallel with the drafting of the 2008 International Recommendations for Tourism Statistics (IRTS 2008) the UNWTO and the Inter-Agency Coordination Group on Tourism Statistics began work on updating the 2000 Tourism Satellite Account: Recommended Methodological Framework. This work focused on overcoming existing conceptual differences in the Tourism Satellite Account and other tourism and economic related frameworks. These included the Manual on Standard International Trade Classification, Migration Statistics, the Balance of Payments Manual, and a revised version of the System of National Accounts 1993. The resulting updated framework, 2008 Tourism Satellite Account: Recommended Methodological Framework, provides greater consistency between tourism statistics and the rest of the statistical system.
The impact of the new standard may vary between countries, depending on how these statistics are compiled and published. In New Zealand’s tourism satellite account, the fundamental change concerns how tourism direct and indirect value added are derived. This change stems from the direct contact principle, which requires a strong economic link between the tourist and the supplier of goods or services.
To understand this change, we examine the concept of tourism output, then outline how it is determined and the impact it has on direct and indirect tourism value added.
Tourism output
Tourism output is derived by removing the imports sold directly to tourists by retailers from tourism demand and comprises the following components:
- tourism intermediate consumption – the goods and services used in the process of production of products sold to tourists
- tourism value added – consisting of:
- direct tourism value added – the value of the output of tourism products by industries, less the value of intermediate consumption (purchased goods and services) used in producing those products.
- indirect tourism value added – generated from the purchase of goods that are subsequently resold, or the purchase of goods and services used in producing products that are sold directly to tourists.
Determining the direct and indirect relationship
To derive direct or indirect tourism value added, it is first necessary to determine the economic relationship that the producer of goods or services has with tourists. For instance, the producer could be a retailer, wholesaler, or manufacturer.
The direct contact principle requires a strong economic link between the tourist and the supplier of the goods or services. This is especially evident between a tourist and a retailer, and therefore constitutes a direct relationship. The wholesaler and manufacturer have no direct contact with the tourist and therefore have an indirect relationship.
In the course of producing goods or services to sell to a tourist, a producer can apply both an amount to recover costs associated with providing the goods or services, and a profit component. This amount can take the form of:
- the margin a retailer applies to selling a product to a tourist
- the margin charged by the wholesaler
- the price received by the manufacturer.
The margin represents the difference between the value at which goods or services are acquired and the value for which they are sold.
The price at which the retailer sells to a tourist includes the margin components outlined above. Once the direct and indirect relationships are established, direct and indirect tourism value added can be determined by following the same direct contact principle.
The impact on direct and indirect tourism value added
Under the previous New Zealand standard, the derivation of direct tourism value added took into consideration the retail and wholesale margin components and the amount received by the manufacturer regardless of interaction with the tourist.
The new recommendation incorporated in the New Zealand TSA and reflected in Tourism Satellite Account: 2009 sees only the retail margin component incorporated within direct tourism value added, as it is the retailer who has direct contact with the tourist. In other words, when measuring direct tourism value added, only the part of the supply that has direct contact with the visitor is considered.
The margin charged by the wholesaler and the amount received by the manufacturer are components that do not have direct contact with the visitor. They are therefore measured within indirect tourism value added. This is illustrated in figure 9.
Figure 9
It is important to note that despite the reallocation of some components of direct tourism value added to indirect tourism value added, the aggregated total tourism value added remains unchanged.
Comparing the old and new standard
The impact on both the direct and indirect tourism value added estimates, and their respective percentage of total industry contribution to GDP, is evident in tables 13 and 14. These tables illustrate the difference between the application of the old standard and the new recommended standard, using results from table 1 of Tourism Satellite Account: 2009.
Flow-on impacts
The introduction of the new standard for the derivation of tourism value added does impact on estimates of direct tourism employment and gross operating surplus as a percentage of total tourism output. The derivation of each of these estimates utilises direct tourism value added. In terms of direct employment, as illustrated with the revised direct and indirect value added estimates, there is a reallocation from direct to indirect employment with total tourism employment remaining unchanged. In terms of gross operating surplus as a percentage of total tourism output, the impact is observed in the all non tourism-related industries category.
Table 13
Table 14
