Appendix A  Concepts and definitions¹

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Concepts

The Canadian Tourism Satellite Account (CTSA) is based on the accounting principles of the System National Accounts (SNA). This internationally recognised system is an integrated framework of statistics that allows for the measurement of a country's economic production. It outlines the structure of the economy and the contribution of each industry.

Satellite accounts, such as the CTSA, have the structure and principles of the national accounts but are developed as an extension to the national accounts system - thus the name "satellite". The subject matter of the satellite account usually cannot be explicitly found in the core account and thus a special calculation is required. Satellite accounts tend to focus on specific aspects, be it social or economic, such as tourism, transportation, or environment. Their presentation and adherence to national accounting principles allows an analyst to compare the satellite account (or area of interest) with the entire economy as measured by the SNA. With the Tourism Satellite Account, one can therefore answer the question, how important is tourism in Canada.

For the Tourism Satellite Account (TSA), the Input-Output (I-O) tables in the Canadian System of National Accounts (CSNA) are particularly important. These tables measure and analyse productive activity in the economy focusing on the producers and purchasers of commodities within the various industries. They show the total output and use of commodities by industries, as well as the primary costs (or inputs) associated with production of the commodities. However, tourism is not an industry identified within the CSNA, as it is dependent on the consumer's purchases as a tourist, rather than on the production of certain goods and services. Constructing the CTSA, therefore, requires splitting industries into their tourism and non-tourism components. By aggregating the value added for the each tourism component, tourism Gross Domestic Product (GDP) may be calculated.

Definitions

At the core of the TSA is the definition of tourism, which is defined internationally as: "the activities of persons travelling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes not related to the exercise of an activity remunerated from within the place visited".² It includes travel for business, leisure and other personal reasons, such as visiting friends and relatives, religious purposes, or medical treatment.

The concept of usual environment relates to the place where the individual lives and works or studies and includes any other places frequented. This notion is not precisely defined in the international standard, thereby allowing a country to apply the tourism concept to its own specifications. For operational purposes, Canada has defined the concept of "outside the usual environment" as greater than 80 kilometres one way from home.³ Crossing an international border, however, is considered tourism no matter the distance travelled.

In the TSA, people who are engaged in tourism are called visitors. Those who stay one or more nights away from home are called tourists, while those who spend no nights away from home are called same-day visitors. In the CTSA, the term tourists used to denote all visitors, whether they are same-day or overnight visitors.

Tourism demand is defined as total spending by tourists on domestically produced commodities. This includes all spending by same-day and overnight visitors, Canadian and non-resident. Total tourism demand can be split into two components domestic demand, and international demand. Domestic demand includes the expenditures associated with tourism activity within Canada by Canadian residents. International demand, also called exports, consists of the expenditures by non-residents in Canada on tourism. Business, government and personal tourism expenditures are included for all types of demand. The CTSA also calculates international tourism imports which are expenditures by Canadians outside Canada.

A tourism commodity is a good or service for which a significant part of its total demand comes from visitors. Thus, air passenger transportation would be a tourism commodity, while groceries, although occasionally bought by tourists, are considered a non-tourism commodity. As another example, meals from restaurants are deemed to be tourism commodities because a significant part of the demand comes from tourists, even though restaurants primarily serve local residents. In Canada, tourism commodities also include goods bought solely for the purpose of travel (e.g., motor homes, tent trailers and luggage). These so-called "pre-trip" expenses are included because the vast majority of spending on these items is in anticipation of taking tourism trips. These items may of course be used for non-tourism purposes as well, but these other uses are considered to be minimal. See Appendix C for the list of tourism commodities in the CTSA.

Tourism consists of a mix of industries and parts of industries and the various commodities they produce. An industry is a grouping of establishments that provide similar commodities to businesses and persons. A tourism industry is defined as one that would continue to exist only at a significantly reduced level of activity as a direct result of an absence of tourism. Some industries are included as tourism even though the majority of their output can be attributed to non-tourism. The food and beverage services and recreation and entertainment industries are examples. Such industries are included because without tourism, their level of activity would be significantly reduced. See Appendix D for the list of tourism industries in the CTSA.

Another important definition in the construction of the CTSA is that of tourism supply. This is the total production of the tourism commodities bought by tourists and non-tourists in Canada. Canadians also buy goods and services outside of Canada, but these are not included in tourism supply. In contrast to the I-O tables where the supply of a commodity always equals its demand, the supply of a tourism commodity usually exceeds tourism demand as defined in the CTSA. This is because tourism supply includes the total production of a tourism commodity whether it is purchased by a tourist or not. For example, 100 units of a tourism commodity (i.e., accommodation services) is produced within a given economy (i.e., total tourism supply of accommodation services =100). This tourism supply of accommodation services is available to be purchased both by tourists and non-tourists. If tourists purchase 90 units, tourism demand would equal 90 units and the commodity ratio (ratio of tourism demand to supply) for accommodation services would become 90% (90/100). The remaining 10% would be purchased by non-tourists.

The tourism commodity ratio is useful in identifying the proportion of a tourism commodity that is actually purchased by tourists. In this example, 90% of accommodation services are purchased by tourists. This ratio is also helpful in the data validation process especially in the reconciliation of demand and supply estimates, and in estimating the share of an industry's employment that is generated by tourism.

Tourism GDP is defined as the unduplicated value of production, within the boundaries of a region (i.e. Canada), of goods and services purchased by tourists. In the CTSA, tourism GDP is valued at basic prices, the same method of valuation as in the I-O tables of the CSNA. Only direct GDP, as opposed to indirect GDP, is measured. Indirect GDP refers to the upstream effects of economic activity (e.g., the manufacture of linens used in hotels). Although these indirect effects are important, they are beyond the scope of the CTSA which focuses on the GDP generated by the production of goods or services consumed directly by tourists. Indirect effects can however be calculated in economic impact models based on the CTSA. Tourism GDP is estimated using the sum of incomes (i.e., the returns to labour and capital from production) attributable to tourism. The components include wages and salaries, supplementary labour income, mixed income,other operating surplus (including profit and depreciation).

Tourism employment is a measure of the number of jobs in tourism and non-tourism industries held by the self-employed, employees and unpaid family workers. Tourism employment includes only jobs directly attributable to tourism. Thus, in the food and beverage services industry, only those jobs that are directly associated with tourism are counted in the CTSA as jobs generated by, or attributable to, tourism. On the other hand, jobs generated in agriculture to support production in the food and beverage services industry (i.e., indirect employment) are not included.⁴

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Notes :

1. In this appendix, a brief description of the concepts and definition is presented. A comprehensive discussion of concepts, definitions, classifications as well as data sources and methods used to compile the CTSA is presented in the Canadian Tourism Satellite Account Handbook, catalogue 13-604, no.52, December 2007.
2. See Tourism Satellite Account - Recommended Methodological Framework. Organisation for Economic Co-operation and Development, Statistical Office of the European Communities, the United Nations and World Tourism Organisation, May 2001, para. 2.1, p. 13.
3. The operational definition of tourism has changed since the reference year 2002. Beginning in 2005, the Canadian Travel Survey was replaced by the Travel Survey of Residents of Canada (TSRC). A major difference is in the operational definition of tourism. In the TSRC, tourism is defined as same-day trips that are "out of town" and forty kilometers or more one way from home and all overnight trips that are "out of town". Exceptions concerning travel to work for education, for military purposes and migration remain. Routine trips (i.e., those that are made at least once a month) are now excluded from tourism, in order to better reflect the notion of usual environment. A more detailed explanation of the differences between the CTS and the TSRC is available in the documentation for the TSRC available at Statistics Canada's website.
4. It might be noted that the human resource dimension of the CTSA is limited as it focuses mainly on monetary aggregates associated with tourism supply and demand and the measurement of GDP. Thus, only the number of jobs and labour income directly attributable to tourism can be found in the CTSA. The human resource aspects of tourism are articulated in the Tourism Human Resource Module (HRM). See Human Resource Module of the Tourism Satellite Account, 2007, catalogue no. 13-604 no. 61, May 2009 for more details.