Economic Impacts of Heritage Areas

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Economic Impacts of Heritage Areas

• Adapting the MGM2 Model

Daniel Stynes Stynes_at_msu.edu MGM2
website http//www.prr.msu.edu/mgm2/
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Outline

• Economic Impact Concepts Uses
• The MGM2 model
• Special Problems Posed by Heritage Areas
• How to Deal with them
• Sample Applications
• Data Gathering Options

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Preface/Reminder
Economic impact is only one measure of the
impacts and values of heritage programs, in most
cases, not the most important one.

• Live by the sword, die by the sword
• Other values
• Cultural/historic preservation
• Education
• Community pride/identity
• Partnerships/Cooperation

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The Basic Process
Action or Program to be evaluated
Change in Number or Types of Visitors to an
Area or Their Use/Spending Patterns
Change in Visitor Spending
Direct changes in sales, income, jobs in tourism
businesses
Multiplier or secondary effects within local
economy
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Flow Diagram
Visitor Spending
Retail Service
Other Suppliers
Wholesale
Manufacturer
Employees
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Types of Effects
Direct effect- Businesses receiving money
directly from tourists, e.g. hotel Indirect
Effects- Businesses receiving money from tourist
businesses, e.g. linen supply firm Induced
Effects- Businesses receiving money from workers
in a direct or indirectly impacted business -
e.g. apartment rentals, groceries, ... Measures
of Effects Sales Income Jobs Value Added
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Methods for Estimating Impacts

• MGM2 / I-O approach
• Surveys to estimate visits spending
• I/O models/multipliers
• Convert spending to jobs and income
• Estimate secondary effects
• Tourism Satellite accounts (TSA)
• Extract tourism from standard economic accounts
• Tourism ratios for each sector percent of sales
  to tourists
• TSA does not address secondary effects

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Characteristics of Heritage Areas of Importance
for Economic Impact Analysis

• Defining the action/program to evaluate
• Visit measures ? Changes in Visits?
• Attributing cause-effect
• Defining the region - linear/Hubs
• Unique segments spending profiles?

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The basic equation
Economic Impact
Visits Spending Multipliers
Example 10 thousand 100 per night
1.5 1.5 million Party nights
spending sales multiplier total sales
effects
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Elaborated/disaggregated
Economic Impact
USE SPENDING MULTIPLIER

• Spending categories
• Lodging
• Restaurant
• Groceries
• Gas oil
• Amusements
• .

• Sector Specific ratios/multipliers
• Capture rate
• Direct ratios
• Multipliers

• Visitor Segments
• Day trips
• Overnight
• Motel
• Camp
• Seas. home

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MGM2 Approach

• Excel Spreadsheet
• Divide up Input Data responsibilities
• Visits User provides
• Spending Shared
• Multipliers Model provides
• Some Standardization Recommended
• Unit of analysis party night/day
• Market segments first based on lodging types
• Spending categories

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Inputs

• Number and Types of visitors
• Spending profiles for each type
• Economic ratios multipliers for the local area

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Outputs

• Spending
• By visitor segment spending category
• Direct Impacts Sales, Income, Jobs, Value Added
• By economic sector
• Secondary Total Effects
• Tax effects

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Lets look at MGM2
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Heritage Area Problems Revisited

• The evaluation question?
• Impact of . On ..
• Significance, Impact
• Before-after or with vs without
• Overall program or a component
• Visit estimates
• Attribution Issues

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Hierarchy of questions

• All tourism activity in a region
• All Heritage tourism, however defined
• Alliance member programs
• Individual sites/programs
• Specific actions
• Marketing
• Product Development

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Getting Input data

• Visit numbers and types
• Spending profiles
• Attribution questions
• Some conversion factors
• Multipliers
• Validation sources

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Survey Approaches

• Method
• On-Site(s), household, on-line
• Sampling
• Representative of population, cost tradeoffs
• Size 50-100 per segment, 400 overall
• Stratify by segments, larger samples from high
  spenders
• Recommend
• Short on-site survey (segment shares, trip
  purpose)
• Mailback/on-line spending survey add marketing,
  evaluation questions as desired

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Total Visits

• From independent secondary source
• From survey sampling interval/plan
• Combination
• Multiple sources, triangulation

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The MITEIM Model
This would be the first worksheet you would see
after downloading the Excel file from the web
site. (You should have a recent version of
Excel.)
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Spending profiles
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Visits
Here we see visits segmented by lodging types and
entered in party nights
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Multipliers

• Multipliers are used to
• Convert spending to income jobs, etc.
• Estimate secondary effects as spending circulates
  in local economy
• Capture characteristics of the local economy
• MGM2 MITEIM models
• Uses sector-specific multipliers
• Generic or Custom
• From IMPLAN

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MGM2 Output Table