Assessing the economic impacts of nature based tourism in Scotland

2.3.2 Assessing employment and income impacts
Employment is generated or sustained by visitor spending and, conventionally, visitor
expenditure impacts are converted into full time equivalent employment (FTE) impacts
through applying appropriate ratios, even where, in practice, the businesses that
receive the additional income from visitors might not take on additional staff, or pay
seasonal or part-time staff for more hours.
The STMS (Surrey Research Group, 1993) was commissioned in 1992 because, prior
to this, ratios for employment impact to visitor spending were often derived from a
Tayside study carried out in 1975 (Henderson and Cousins, 1975). The Tayside ratios
indicated a lower employment impact per £ spent by visitors than later empirical
evidence suggested, and were not necessarily appropriate for areas other than
Tayside.
The STMS (produced for a range of agencies) was based on case studies in six areas
– Edinburgh, Dundee, Inverness & Nairn, Skye, Lanarkshire, and Tayside – using
existing data not always strictly applicable in some cases (for example, expenditure
patterns from the UKTS for Tayside were used for the city of Dundee).
From this and other business survey data, input-output models were constructed to
give multipliers and ratios for urban areas, rural areas and remote rural areas. The
Highlands and Islands was not a study area, although recent tourism impact reports
have used multipliers from the study for smaller rural areas as if they apply to the
Highlands and Islands (i.e. the area covered by Highlands and Islands Enterprise).
Even in 1991 (the reference year for the study), many of the multipliers and ratios by
sector and area were mutually inconsistent and adjustments were required for accurate
impact analysis – although the main ratios broadly matched contemporary empirical
evidence • . For example, an increase in expenditure by UK resident tourists of just over
£27,000 was estimated to generate 1 FTE job in the city of Edinburgh, and
(coincidentally) in Skye, and just over £19,200 in Inverness and Nairn. The study
report gave multipliers for types of tourism business and area to four decimal places –
although (at best) many will have been accurate to only one decimal place.
STMS results, updated for inflation since 1991, are still used in many studies simply
because a similarly comprehensive study has not been undertaken since – even
though the figures in the report are now 19 years out-of-date, many of the figures were
not accurate even in 1991, and the modelling for types of area was heroic (e.g. the
Skye results carried a large importance).
This continuing reliance on the STMS abstracts from productivity changes since 1991,
the extent to which earnings from employment might have risen faster than inflation,
and changes in visitor expenditure patterns (through both demand and supply factors).
In short, using empirical data that relates to relevant sectors and areas is far superior
to using STMS, and, where the STMS modelling is used, the ratios should be rounded
– e.g. through assuming that £40,000 of visitor expenditure in the Western Isles will
support 1 FTE, rather than (say) £41,100 – although it can be necessary, in comparing
one year with another, to use figures that otherwise would have spurious accuracy to
allow for inflation.
• Steve Westbrook, for example, has always used actual data from the financial accounts for a large
sample of businesses assisted by HIE to inform the estimation of multipliers by sector for the
Highlands and Islands and Scotland.
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