Economic Evaluation ToolsTYPES OF ECONOMIC ANALYSISBenefit-Cost AnalysisCost Effectiveness AnalysisFiscal impact analysisEconomic Impact AnalysisQuestions an EIA AnswersTypes of Park Impact AnalysesSteps in an Economic Impact AnalysisWhat are economic impacts of Recreation & Tourism?PowerPoint PresentationSlide 12Slide 13Slide 14Economic Evaluation Tools•Benefit-Cost Analysis•Cost Effectiveness Analysis•Financial Analysis/Feasibility•Fiscal Impact Analysis•Economic Impact Analysis•Social/Environmental Impact AnalysisTYPES OF ECONOMIC ANALYSIS •Economic impact analysis (EIA) -- What is the contribution of tourism activity to the economy of the region? •Benefit Cost analysis (B/C) – Which policy will generate the highest net benefit to society over time? •Environmental Impact assessment – What are the impacts of an action on the surrounding environment? •Fiscal impact analysis – Will government revenues from tourism activity (taxes, direct fees, etc.) cover the added costs for infrastructure and government services•Demand analysis – How will the number or types of tourists change due to changes in prices, promotion, competition, quality,etc.? •Feasibility study – Can/should this project or policy be undertaken? •Financial analysis – Can we make a profit from this activity?Benefit-Cost Analysis•Measures economic efficiency as ratio of benefits to costs•Used in evaluating alternative actions•Measure stream of benefits and costs over time resulting from a project•Value these B/C in dollars•Discounting, NPV to handle time•Non-market benefits measured via WTPCost Effectiveness Analysis•Used in lieu of B/C when valuation of benefits is difficult; also measures efficiency•Best for comparing alternative means of delivering similar benefits•Evaluate in terms of Cost per unit of output•E.g. $ 4 per camper night to provide State Park camping experienceFiscal impact analysis•Assess impacts of a project on government revenues and costs•Identify added service requirements•Estimate costs and revenues received from fees or taxesEconomic Impact Analysis•Assesses impacts on sales, income, jobs, in a region•Action Activity Spending Jobs•Impact = Visits * Spending * Multiplier•With vs Without AnalysisQuestions an EIA Answers-How much do visitors spend in the area? -What portion of sales by local businesses is due to tourism?-How much income does tourism generate for households and businesses in the area? -How many jobs in the area does tourism support?-How much tax revenue is generated from tourism?-How are businesses in an area linkedTypes of Park Impact Analyses•By the Stimulus–Visitor Spending–Park Operations –Construction•Which Spending is included–Significance–Impact •Justification or Evaluation–Impacts of all visitor spending–Impacts of a management alternativeSteps in an Economic Impact Analysis•Define the action(s)•Identify visitors/visits affected (segments)•Define the study region •Specify Inputs–Visits–Spending averages–Multipliers•Inspect, Interpret & Communicate ResultsWhat are economic impacts of Recreation & Tourism?Covered in EIA•Sales•Income•Jobs•Tax RevenuesDirect & Secondary EffectsUsually Not Covered•Price Changes•Changes in QL or QN of goods & services available in an area•Seasonality•Fiscal costs•Non-market B/C e.g. CongestionThe Economic Impact Process Activity Spending Regional EconomyPolicy Plan or ActionActivities Visitors AgencyRecreation Operations ConstructionTrip spendingWages & SalariesDirect effectsIndirect effects Induced effectsDurable GoodsGoods & ServicesEconomic ImpactSpending per VisitorCapture rate*= **USE SPENDING MULTIPLIERTypes of EffectsDirect effect - Businesses receiving money directly from tourists, e.g. hotelIndirect Effects -Businesses receiving money from tourist businesses, e.g. linen supply firmInduced Effects - Businesses receiving money from workers in a direct or indirectly impacted business - e.g. apartment rentalsMeasures of EffectsSalesIncomeJobsValue AddedMultipliersExpress total effect in relation to direct effectTypes of MultipliersSales, Income & Employment Multipliers Ratio and KeynesianType I and, IIAggregate, Sector-specificType I = direct + indirect directType II = direct + indirect +
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