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Journal number 3 ∘ Giorgi Bregadze
Methodological Issues in Measuring Tourism Direct Economic Benefits

Expanded Summary

Tourism is the most viable and sustainable economic development option for Georgia and one of the main sources of foreign exchange earnings. Number of international traveler visits is increasing in Georgia, contributing to the national economy. The given article stresses the necessity of research based economic policy in tourism sector. In this regard, it is of paramount importance to measure direct economic effects of the tourism. Public would like to know how much inbound visitors are contributing to the economy. In this article we discuss the methodology available around the world that helps answering this question. 

Tourism recognition as an economic development tool is increasing in lesser-developed nations, including Georgia.  Tourism can promote economic development more quickly, than other industries, it can attract significant amount of financial capital, support infrastructural development and provide new job opportunities. Furthermore, if the country’s economic policy is strictly oriented on poverty reduction the largest share of income from tourism will go to the poorest segment of the population, contributing to the reduction of poverty in the country. Another use of tourism can be for rural population development. Rural communities in Georgia are looking for the alternatives of the tradition industries that can generate addition income.  Tourism can be the industry that will provide addition source of income for the people, especially in mountainous regions.

The society in Georgia is increasingly interested in economic effects of tourism. They would like to know how addition expenditure spent by visitor can effect different economic variables. The expenditure from visitor is viewed as a direct economic effect of tourism. Expenditures can come in different forms and applied methodology of measurement may also be different, including: international visitor survey, entry/departure cards, domestic visitor survey, national bank survey and tourist establishment survey.

International visitor survey focuses on international visitors travelling in the country. The survey can be conducted as they enter the country, as they leave the country, or while they are still in the country. Furthermore, route surveys can also be conducted while they are travelling using different transport means to or from the destination.  Among these methods most efficient are the one conducted while visitor departs from the country. It allows to capture actual expenditure of the total trip, rather than amounts intended. The experience of other countries shows that the exit-survey model provides most exact expenditure information, if respondents are asked question about previous 24 hour period and multiplied by the projected length of stay.

Entry departure cards are one of the major source for estimation of international visitor expenditure. It allows to measure the total population of visitors and gives opportunity to disaggregate on national level. Its weakness is connected with the administrative burden levied on the visitors, its size and difficulties connected with administration.

Domestic tourism survey measures expenditures of domestic visitors. It is based on household survey and many countries have systems that allow systematic measurement of the variables: personal income, labor force participation and etc. Some countries conduct domestic tourism survey separately, it allows more disaggregation of data connected with tourism. The main weakness connected with this type of surveys are connected with recall bias. Memory effects are mainly connected with miscalculation of number of trips.

Participation of the Central Bank in estimation of visitor’s expenditures is mainly connected with bank records of foreign exchange transactions. A lot of countries estimate international visitor expenditures by computing amount of national currency sold visitors from the agencies actually making this sales. This method has it weaknesses as well. It’s difficult to distinguish international visitor from others, include all transactions made by them and administer accurately data delivery. Furthermore this method does not allow to categorize expenditure types.

Tourist establishment survey measures the expenditure made on main categories of tourism and include: accommodation, restaurant, transportation, etc. Although the providers can measure sales to travelers with a high degree of reliability, it is highly unlikely that they can distinguish international visitors from other customers.  Another problem is connected with the refusal to share data. This could be caused by feat that data will be shared with other competitors.

Researchers use methodologies provided above to estimate effects tourism on different economic variables including: output, employment, income, export, and environment.

Output-researchers are often interested how increased expenditure effected levels of output, production, GDP or similar measures.

Employment- researchers measure changing level of employment which is cause by changing level of visitor expenditure.

Income- Tourism is important source of income for the most countries of the world. Expendtiures from tourism are increasing annually generating addition income (also in terms of wage) to the people and to the government as tax revenues.

Export-the expenditure of foreign guests has a huge effect on the national balance of payments. On the asset side, it reports the income from international visitors.

Environment-many researchers go beyond the traditional economic variables and measure social, cultural, physical and biological effects of tourism.

To summarize, tourism plays very important role in economy and its direct contribution to the economic indicators is significant. Tourism Economic effect analysis and corresponding surveys are important for planning and formation of economic policy. It is also the source for marketing and management decisions in tourism and other industries as well. Society needs to understand the importance of tourism in economy. For this, methodologies discussed in this paper and accepting world’s best practices is of paramount importance in Georgia.