INTRODUCTION
1. GENERAL
Tourist is defined as a person traveling outside his usual environment, in order to see other places, to enjoy himself or to visit relatives and friends. According to the UNWTO (United Nations World Tourism Organization), a business trip is also defined as a type of tourism – business tourism.
Businesses in every industry provide the necessary services for tourists before their trip, during it and afterwards. The main services are accommodation, travel agencies, transportation and attractions operators, sales of equipment to tourists, etc.
The purpose of this publication is to present the added value of tourism; i.e., to examine what is the economic contribution of tourism to the national product.
This publication describes the process of calculating the tourism share of various industries in the economy, which is defined as a tourism product (TVA – Tourism Value Added).
Calculation of the tourist product is done according to a method developed by the UNWTO (United Nations World Tourism Organization), the TSA – Tourism Satellite Account[1]. The model of the tourism satellite account presents input-output tables of all industries related to tourism, compared with all other industries.[2]
The data in the publication relate to 2004. The previous satellite account was produced for 1995. In addition, the publication presents comparisons between the two above years.
The source of the data that were used for preparing the tourism satellite account are both supply data and demand data.
Following is a breakdown of the data sources:
· The Supply and Use Table[3] for 2004 is the basis of the tourism satellite account system.
· An additional important source is the Central Bureau of Statistics Household Expenditure Survey for 2004, which – among other things – also examines households’ expenditures on trips and travel.
· The Central Bureau of Statistics’ trade and services survey and manufacturing survey for 2004 served as a source of data on output, intermediate inputs and the value added of commerce and services industries.
· The inbound tourism survey conducted by the Ministry of Tourism provided estimates for distribution of expenditures by tourists from abroad in the country.
· Additional surveys of the Central Bureau of Statistics on subjects related to hotels in the country, as well as data on inbound and outbound tourists and Israelis, assist in examining the results of the tourism satellite account.
· Data from the Balance of Payments published by the Central Bureau of Statistics.
2. MAIN FINDINGS
A. Summary of findings (Table A)
In 2004 the total tourism consumption[4] in the economy stood at approximately NIS 21,764 million[5] (at consumer prices).
The added value of tourism (local product of tourism) totaled approximately NIS 8,970 million, which is approximately 1.8% of the national product (Table 6 in the tables section).
TABLE A.- SELECTED INDUSTRIES AS A PERCENTAGE OF THE TOTAL NATIONAL PRODUCT, COMPARED WITH THE TOURISM INDUSTRY
2004
Percentages
Tourism / 1.8Agriculture, forestry and fishing / 1.6
Manufacturing / 13.4
Electricity and water / 1.9
Construction / 4.3
In 2004 Israeli tourism consumption in the country contributed approximately 61% of total tourism consumption.
The rest of tourism consumption – 39% - is assigned to inbound tourism to Israel from abroad.
B. Background
In 2004 there was an economic recovery in Israel – the gross national product rose by 5.2%, compared with 2003. The per capita product grew by 3.6%, after a continuing drop of three years.
The economic growth in Israel’s economy in 2004 was mainly focused in hi-tech industries, similar to that of commercial and financial services industries, that grew significantly. Other industries as well enjoyed an expansion, but at a lower rate.
The growth in the services industries stemmed mainly from a rise in the demand for IT products of the world, which caused a rise in the export of computer and R&D services; and as a result, to a growth in the activities of commercial and financial services. In 2004 the commercial and financial services industry reached 20% of the product, compared with its share in 1995 – approximately 16% of the product.
TABLE B.- ECONOMIC INDICATORS OF THE ENTIRE ECONOMY AND EXTENT (MOVEMENT) OF INTERNAL TOURISM, INBOUND TOURISM AND OUTBOUND TOURISM
1995 / 2003 / 2004 / Percentageof change
2004
1995 / Percentage
of change
2004
2003
Economic indicators of the entire economy
NIS at 2004 prices
Gross domestic product
(millions) / 421,049 / 534,549 / 563,713 / 34 / 5
Gross domestic product
per capita / 75,934 / 79,906 / 82,789 / 9 / 4
Private consumption
expenditure per capita / 42,412 / 44,434 / 46,389 / 9 / 4
Tourist movement
Thousands
Tourist entries
into the country / 2,216 / 1,063 / 1,506 / -32 / 42
Israeli departures abroad / 2,259 / 3,299 / 3,614 / 60 / 10
Tourist person-nights
in hotels / 9,790 / 3,518 / 5,028 / -49 / 43
Israeli person-nights
in hotels / 6,737 / 12,460 / 12,991 / 93 / 4
In the accepted indicators for estimating the state of tourism – tourist entries, person-nights in hotels, departures of Israelis abroad – there were also increases recorded in 2004, compared with 2003:
l In inbound tourism – The economic growth in the world, and the improved state of security in Israel, caused a rise of approximately 42% in the number of tourist entries into Israel in 2004, compared with 2003; after the sharp drops recorded in inbound tourism in 2002-2003, due to the security situation. Despite the rise in the number of tourist entries, a slump was still recorded in inbound tourism in 2004. Compared with 1995, the number of tourist entries in 2004 was lower by 32%.
In 1995 tourist person-nights were approximately 60% of all person-nights in hotels, whereas in 2004 the tourist share of person-nights constituted approximately 28% of all person-nights in tourist hotels.
l In internal and outbound tourism – Economic growth and the rise in the standard of living in Israel in 2004 caused a rise in the Israeli demand for tourism services.
According to the household expenditures survey, the number of Israelis going on trips in the country rose in 2004 by 14%, compared with 2003. The number of Israeli person-nights in hotels rose by 4%, and the number of Israeli departures abroad rose by approximately 10% that year. Compared with 1995 the number of Israeli departures abroad rose in 2004 by approximately 60%, and the number of Israeli person-nights in hotels in the country almost doubled. The data on Israeli person-nights in 2004 were among the highest experienced by hotels in Israel till that period. As for hotel occupancy, the rise in the number of Israeli person-nights served to counter the drop that occurred in the number of tourist person-nights.
This publication translates the changes in movement of all the above types of tourists (inbound tourism, internal tourism and outbound tourism) into financial terms used in national accounts, and they present the economic contribution of all the types of tourist activity to the economy.
The estimation of tourist consumption constitutes the first phase of the process of producing tables for the tourism satellite account.
C. Components of tourism consumption
Estimating tourism consumption in the economy constitutes a basis for the calculation of the output and the product of the tourism industry. Tourism consumption was measured in industries defined as tourism industries (such as accommodation services, transportation services, travel agencies, cultural activities, entertainment, etc.) and other industries defined as connected to tourism[6] (food and beverages, clothing, gift items and jewellery, insurance, etc.).
In 2004 tourism consumption totaled approximately NIS 21,764 million (a drop of approximately 1% compared with 1995 – at 2004 prices). 61% of all tourism consumption was that of Israelis, and the rest – 39% - of tourists from abroad. In 1995, the first year for which a tourism satellite account was compiled, the composition of tourism consumption was completely different from that of 2004 – 65% was contributed by tourists from abroad, and 35% by Israeli tourists; in accordance with the change in tourist movements in the two years examined (Table B and Diagram 1).
Despite the fact that Israeli tourism consumption rose in 2004 by 75%, compared with that of 1995, no significant change has occurred in total tourism consumption, and it has dropped by only 1%, because the tourism consumption of foreign tourists dropped by 41% (Table C).
With regard to the change in the consumption data of foreign tourists, as expected, the consumption of products defined as “luxury” – souvenirs, jewellery, shopping – dropped by a greater rate than the consumption of products without which the trip would be impossible – accommodation services, food services[7] and transportation services.
In Israeli tourism consumption in 2004, a sharp rise can be seen in consumption of transportation services, due to the rise in expenditures related to private vehicles (following the rise in the number of trips in the country), but mainly due to the rise in expenditures on air transport services of Israeli companies (a growth of 55%, as a result of the rise of 60% in the number of Israelis who left the country in 2004, compared with that of 1995). Following the rise in internal tourism and in the number of Israeli departures abroad, the consumption of services provided by travel agencies also rose by approximately 27%.
The sharp rise in tourism consumption of dining services by Israelis stems from the rise in internal tourism, as well as technical reasons of changes in the definition of the industry.7
In conclusion, it can be said that the total tourist demand in industries that mainly supply services to foreign tourists, and less to Israelis for trips within the country, dropped in 2004 compared with 1995; and therefore, there were sharp drops recorded in tourism demand in industries belonging to the category of “tourism connected products” – souvenirs, jewellery, food, etc., as well as in bus services, taxi services and car rentals. However, the total tourist demand for transportation services rose (Table C) because of the rise in demand for air transport services, which constitute approximately 60% of the tourist demand for transportation services.
TABLE C.- TOURIST CONSUMPTION[8] OF GOODS AND SERVICES[9]
NIS millions at 2004 prices,* unless otherwise stated
Servicesand goods / 1995 / 2004 / Percentage of change
2004
1995
Total / Foreign tourists / Israelis / Total / Foreign tourists / Israelis / Total / Foreign tourists / Israelis
Total / 21,983 / 14,344 / 7,639 / 21,764 / 8,424 / 13,340 / 1- / 41- / 75
Accommodation
services / 5,033 / 2,887 / 2,146 / 5,364 / 1,653 / 3,711 / 7 / 43- / 73
Restaurants
and dining
services / 1,521 / 1,096 / 424 / 2,018 / 926 / 1,092 / 33 / 16- / 157
Public
transportation
and private
vehicle services / 6,992 / 4,347 / 2,644 / 8,365 / 3,196 / 5,170 / 20 / 27- / 96
Travel and
tourist agencies / 2,267 / 656 / 1,611 / 2,328 / 288 / 2,040 / 3 / 56- / 27
Entertainment
and sport
services / 756 / 453 / 302 / 661 / 180 / 481 / 13- / 60- / 59
Other tourism-
connected
services / 1,597 / 1,373 / 224 / 915 / 599 / 316 / 43- / 56- / 41
Other tourism-
connected
goods / 3,818 / 3,531 / 287 / 2,114 / 1,582 / 531 / 45- / 55- / 85
* 1995 data were calculated at 2004 prices, according to the change in the Consumer Price Index, which rose by 46% between 1995 and 2004.
In 1995 the hotel and air transport services industries served mainly foreign tourists. In 2004 the target groups of the industries changed from tourists to Israelis, and thus the total consumption in these industries rose.
In industries whose main users for trips are Israelis, such as services related to private vehicles and travel agencies, the demand rose in comparison with 1995.
Items of expenditures on tourist goods and services (Diagram 2 below, and Table 4 in the tables section): In 2004 transportation services, which include public transportation, air transport and services related to private vehicles, constituted the greatest expenditure of the total tourism consumption – approximately 38%, especially due to the demand for air transport services, which constituted approximately 24% of total consumption.
Accommodation services constituted approximately 25% of all tourism consumption in 2004 (20% among tourists and 28% among Israelis). Travel and tourist agencies services constituted approximately 11% of all tourism consumption (3% among tourists and 15% among Israelis). Following them are restaurant services, which constituted approximately 9% of tourism consumption (11% among tourists and 8% among Israelis). Entertainment, culture and sport services constituted approximately 3% of all tourism consumption.
Import components of tourism consumption among foreign tourists are goods in the “other goods” category, which include food, clothing, jewellery and other equipment, and constitute 19% of all consumption by foreign tourists.
The value added of tourism components was calculated on the basis of tourism consumption data (see below).
D. Output and national product of tourism – value added of tourism (TVA)
Value added is the difference between the value of the goods or service provided and the value of the inputs used to produce the goods or service. It is common to measure the contribution of a specific industry to the local economy by presenting the added value of that industry relative to the total of the goods in the economy. Therefore, the tools used in national accounts are also used in tourism, in order to make it possible to compare it with the rest of the industries in the economy, as well as with other countries.
The tourist output in 2004 reached NIS 20,591 million, 6% less than the tourism output in 1995 (Table D below, and Table 5 in the Tables Section). During that same period the total output in the economy grew by approximately 40%.
TABLE D.- TOURISM OUTPUT[10]
At 2004 prices
Servicesand goods / 1995 / 2004
Tourism output / Tourism output rate of the total industry output / Tourism output / Tourism output rate of the total industry output
NIS Millions / Percentages / NIS Millions / Percentages
Total / 21,982 / 20,591
Accommodation services / 4,843 / 89.0 / 5,135 / 99.6
Restaurants and dining
services / 1,407 / 14.0 / 1,737 / 13.0
Public transportation and
private vehicle services / 6,865 / 18.0 / 7,972 / 14.0
Travel and tourist agencies / 2,212 / 100.0 / 2,253 / 100.0
Entertainment and sport
services / 719 / 7.0 / 606 / 18.0
Other tourism-connected
services / 1,472 / 3.0 / 860 / 1.0
Other tourism-connected
goods / 4,464 / 3.0 / 2,028 / 1.0
In industries in which tourist demand dropped compared with 1995, the output also dropped, such as in tourist-connected goods and bus and taxi services (the rise in output of transportation services stems from the rise in output of air transport services, which constitute 64% of the tourism output of transportation services).