Tourism’s Forward and Backward Linkages

Cai, Leung, and Mak (2006) JTR

Presented by Suh-hee Choi

HTM571 Presentation (April 28)

Tourism Impact Analysis

Link-age Analy-sis

Tourism Impact Analysis

Final demand• Direct and indirect

impacts

Linkage Analysis

Tourism sector• Strengths of the inter-

sectional forward (FL) and backward (BL) relationships between the tourism sector and the non-tourism industries

goods and services to tourists

tourism-re-lated sectors

non-tourism

industries

Forward Relationship : tourism as suppliers

impor-tant de-mander

less impor-tant deman-

der

Backward Relationship : tourism as demanders

na-tional

re-gion

al

local

input-output

Identifying the strength

Section 1

•How to de-fine the tourism in-dus-try

Section 2

•The methodology of link-age analysis

•The steps to cal-cu-late the for-ward and backward link-ages

Section 3

•Ap-pli-cation of link-age analysis to Hawaii

•1987-1997

Defining Tourism

No designated NAICS code TTSA Industries that sell a significant portion of their

output to visitors

(3)

(6)

Other state and local government enterprises

HotelsAutomobile rentalAmusement servicesApparel and accessory storesFood serviceMuseums and historical sites

Sightseeing transportationMiscellaneous store retailersTravel arrangement and reservation servicesDepartment stores

Investigation and security servicesAdvertisingSupport activities for transportation

Interindustry Linkage Analysis

Individual linkages for each tourism-related

industry(Indices)

Share of total tourist spending

Industries in an I-O table

Tourism-re-lated

Direct tourism

Supporting tourism

Non tourism-re-

lated

Nontourism

Measuring BL and FL

Backward Linkage Measure

Leontief supply-driven multiplier (LSD) (Cai and Leung, 2004)

Forward Linkage Measure

Ghosh (1958) supply-driven multiplier (GSD)

• An industry’s relationship with its upstream suppliers

• To generate 1$ of sales in hotel, how much of production is needed by its suppliers?

• Direct and indirect relationship with its downstream buyers

Leontief Supply-Driven Multiplier

x = A x+ f

output finaldemand

directinput

coefficientmatrix

Partitioned I-O model

i: industry I / j: rest of the economy

Backward-linkage from one unit of output change in industry i :

Industry i’s Leontief supply-driven multiplier (LSDi) :

summation vector

initial unit output changein industry i

Ghosh Supply-Driven Multiplier as a Forward Linkage Measure

x’ = x’ B+ w’

direct output

coefficientmatrix

primaryinput

output vector

Partitioned I-O model

Forward-linkage impacts of the unit output change in industry i on the output of other industries:

Industry i’s Ghosh supply-driven multiplier:

back-ward

forward

To produce $1 of output in the hotel industry, hotels use $0.412 of output produced directly and indirectly by other industries.

Interindustry Linkages for Nontourism Component

average: 1.928 1.436

Interindustry Linkages for Nontourism Component

average: 1.928 1.436

1$ of output sold for tourism use generated $0.928 of downstream sales, but the same dollar of output sold for nontourism uses generates only $0.436 of downstream transactions.

Linkage between Tourism and Nontourism Components Assumption : there are no relationships between

the two. In reality, they are related. Linkage analysis does not address this issue.

Conclusion

Linkage analysis helps us to understand tourism’s relationship to the other industries in an economy.

Forward linkages appear to be complicated when producing for tourism.