Measuring and Forecasting Demand - Tourism: Principles, Practices, Philosophies - page 290

Measuring Tourism Expenditures
through Tax Collections

Many states have a sales and use tax on consumer items. These tax collections provide a statistical
base for calculating tourist expenditures. Suppose that a state has a 4 percent use tax on hotel and
motel rooms. If we know what percentage of the average tourist dollar is spent for lodging, we could
make an estimate of how much is spent on lodging and total expenditures, as illustrated in the
following hypothetical example:
Rooms tax collections ¼ $5 million

Rooms use tax rate 4 percent

Total lodging spending ¼ $5 million 0:04 ¼ $125 million
Lodging expenditures

¼

¼ 25 percent of total spending

Total expenditures ¼ $125 million 0 : 25 ¼ $500 million ð visitor-nights Þ

Estimated spending of those not using commercial lodging þ Visitor-day spending ¼ $600 million

Total D ð $ Þ¼ $500 million þ $600 million ¼ $1 : 1 billion

Research in Measuring Demand

Considerable interest exists in improving methods of measuring current demand. Tourism is a labor-
intensive service industry. As such, it is looked upon by state governments as a promising business to
relieve unemployment. But one of the main problems is to determine its current financial dimensions.
Of cial tourism organizations are typically charged with the responsibility of undertaking research
to measure economic impact and current demand. In this task they are assisted greatly by the U.S.
Travel Association (USTA). Details on research are provided in Chapter 18. The next research task is to
make an estimate of what the future demand might be should certain steps be taken by the
destination area.

PROJECTION METHODOLOGY

Several statistical methods or econometric analyses can be used to project demand. All require a degree
of statistical or mathematical sophistication, familiarity with computers, and a clear understanding
of the purpose (and limitations) of such projections. Listed are several such methods with brief
explanations. For a more complete review, see the references for this chapter at the end of the topic.

Trend Analysis Method

The method involves the interpretation of historical demand data. For instance, if a

record of the number of tourist arrivals in an area on an annual basis is available, then demand for
future years can be projected using this information. The first step is to plot the available data on a
graph: time (in years) against the tourist arrivals. Once this has been done, a linear trend can be
established that best captures the changes in demand levels in the past.

trend analysis

for
future years can now be made by extending the trend line up to the relevant year and reading the
demand estimate off the graph. Figure 13.1 illustrates this procedure. The points represent the levels of
demand for the six-year period for which data are available.

Demand projections