An assessment of the weight of tourism in the Balearic Islands

1
An assessment of the weight of tourism in the
Balearic Islands
Tourism Economics in Islands Models and
Development Strategies

• Clemente Polo and Elisabeth Valle

30 April, 2007
Azores Islands Portugal
2
I. Introduction
Number of international tourists arrivals

• World

1950 25.3 million
2000 687.3 million

• Spain

1950 289,200 tourists
2000 46.4 million

• Balearic Islands

1950 758 tourists
2000 10 million
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I. Introduction
4
II. Input-Output Table 1997
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II. Input-Output Table 1997
Figures in million pesetas

• Total resources
  4.193.397
• Production
  3.133.403
• Imports from the ROS
  788.728
• Imports from the ROW
  88.544

• Uses
  4.193.397
• Intermediate consumption 1.159.932
• Final Demand
  2.888.121
• Residents consumption
  44,51
• Non residents consumption
  33,00
• Public consumption
  6,95
• Gross capital formation
  15,54
• Exports
  145.345

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II. Input-Output Table 1997

• 4 and 5 star hotels
• 1-2-3 star hotels
• Tourist apartaments
• Other lodging
• Travel agencies
• Bars and coffee shops
• Restaurants
• Disco and other recreational
• and cultural services
• Car renting
• Real estate

35 Production
39 Value Added
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IV. Input-Output Model (IOM)
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IV. Input-Output Model(IOM)
Direct and indirect effects of tourism
Production
Employment
? employment/production
Imports from the rest of Spain
9
V. Results with the standard IOM

• Highly tourist sectors (Account for 60.7 of the
  total non residents demand)
• 4-5 star hotels (98.09)
• 1-2-3 star hotels (96.42)
• Tourist apartments (94.48)
• Other lodging (94.11)
• Car and other renting(87.33)
• Tourist sectors (19 del CNR)
• Travel agencies (58.41)
• Bars and coffees shops (55.53)
• Disco and other cultural services (41.94)
• Restaurants (38.13)
• Air transport (37.28)
• Land transport (31.04)
• Marginal tourist sectors (11 del CNR)

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V. Results with the standard IOM
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V. Results with the stardard IOM
Tourism Multiplier
1,28
12
VI. The extended IOM (RC)
The standard IOM is expanded to endogenize
residents consumption
Imports from the rest of Spain
13
VII. Results with the extended IOM (RC)
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VIII. The extended IOM (RC-K)
The standard IOM is expanded to endogenize
residents consumption and depreciation investment
Production
Imports from the rest of Spain
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IX. Results with the extended IOM (RC-K)
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X. Comparing with SAM
A SAM is a square ordered matrix where each row
and its corresponding column provides the
resources and uses, respectively, of an account.

• The accounts record transactions of goods and
  services in productive activities, income flows
  from production to institutions, voluntary or
  compulsory transfers among institutions and the
  acquisition of commodities or financial assets by
  institutions.
• In short, a SAM is a square matrix that provides
  a quantitative and comprehensive representation
  of the income flow production, income generation
  and distribution and the way income is finally
  allocated and the produced commodities are
  absorbed. It can also include financial
  transactions and other extensions such as
  information on pollutants.

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X. Comparing with SAM
Simulating a 10 percent fall in non-residents
demand
IOM residents consumption over wage income
SAM residents consumption over total resident
income
IOM investment over consumption of fixed capital
SAM investment over total savings
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XI. Conclusion
Using a standard IOM, we estimate that tourism
generates 36.23 percent of the value added, 30.12
of employment and it accounts for 19.96 percent
of total imports from the rest of Spain. When
the model is extended to endogenize residents
consumption and depreciation investment, the
weight of tourism rises to 72.07 percent in the
case of value added, and 68.01 in the case of
employment moreover, it responsible for 65.11
percent of all imports. In view of these
figures, it is fair to say that almost three
quarters of the Balearic Islands economy is
sustained by tourism.