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THE ECONOMI C IMPACT OF TOURI SM IN TAUPO 

A thesis p r esented in partial fulfilment 

of the requirements for the degree of 

Masters in Business Studies 

in Economics and Tourism at 

Massey University 

David Frederick Serjeant 

1984 



C O N T E N T S 

Acknowledgements 

Absti:act 

1. 

2. 

2. 1. 

2. 2. 

2. 3 . 

2. 4 . 

3 . 

3. l. 

3.2. 

3. 3 . 

3. 4. 

3 . 5 . 

3 . 6. ' 

3 . 6.1. 

3 . 6 . 2. 

3 . 6 . 3. 

3 . G. 4 

3. 6 . 5 . 

3. 7 . 
4 . 

4 . 1. 

4. 2. 

4 . 3. 

4. 4 . 

5 . 

5.1. 

5. 2. 

5 .2.1. 

5 . 2 .2. 

l N'i'RODUCTICN 
FOCll S Oi~ AP!'I\01\Cll 

Frame of Refetcnce 

Obj c clivez 

Hethodol ogy 

Methodological Development i n Tourist 

lh1pc1c: t Studies 

MULTIJ?LIEH 1-:0DELS 

Introduction 

Econo~ic ll~~e Multipli~ts 

lnput-Ou tpnt i.:•.tltipliets 

Arplications of Inp:.>t-Outpul in 

'!'our ism Sl\~,1; <.·S 

Econo!neti: ic ~iul tipJ.i er: s 

Weaknrsscs and Limitations 

Octa Deficiencies 

Restrictive A,,sumplions 

The Ex i s t,incc of Supply Const 1: ai nts 

The ll se o( Jlorcongen' ov:; Li near 

Consumpl ion Functions 

The Absence of a Pepecc11ssive Feedback 

Mech.i ,1 ism 

The Sensitivity of Coc[f icients 

THE MODJ::L TO BE USED 

Regional Income Generation Model 

Component Terms of the Model 

Summary Assessment of Model 

Regional Empl oyment Generation Model 

SURVEY DEFINED 

•rhe Study Region Defined 

Tourist Expenditure Survey 

Data Obtained from Businesses 

Data Obtained from Tourists 

ii 

Page 

1 

5 

5 

6 

6 

9 

11 

11 

11 

14 

l G 

19 
25 

25 

26 
27 

28 

28 

29 

31 

31 

33 

37 

38 

41 

41 

43 

4 4 

4 4 



5 . 2.3. 

5. 2 . 4 . 

5 . ?..5. 

5.2.6. 

5.2.7. 

5.2.8 . 

5 . 2. 9 . 

5 . 3. 

5 . 3 . 1. 

5.3 . 2 . 

5 . 3. 3. 

5. 3. ~-

s. 3 .. 5 . 

6 . 

6. l. 
6. 2. 

6 . 3. 

6. ~. 

6 . 5. 

6 . 5 . 1. 

6. 5 . 2 . 

6 . 5 . 3 . 

6. 5 . 4 . 

6 . 6 

7. 

7. 1. 

7 . 2. 

8 . 

8. 1. 

8. 2. 

8.2 . 1. 

8.3. 

8 . 3.1. 

9 . 

9. 1. 

The Tourist PattPcn - A Survey 
Cons ideration 

General Survey 

Questionnaire Design 

Hotel/Hotel 1•ourist Survey 

Holiday n~ne Tot1rist su:vey 

Caravan and Camping Tourist Survey 

Coach Tour Tourist Survey 

nusiness Surveys 
1\ccc:r.·1>~)dd. ti on 

Generc1l Retail 

Restnurant!:: 

Constcuution Industries 

vehicle Industries 

TOUR I SM IN 'l'AUVO 
Brief llisi.:ory 

Post-1915 oeveln~mPn t 
Tour i s,,, Resourr;e Inventory 

The Pattern of Tourism 

Tourism in Taupe TodJy 

Hotel/Motel Tourists 

Holiday Home Tour ist= 

Caravan and Campi~g Tourists 

Coach Tour Tourists 

Comparison wi t h Other Data 

EXPENOI'rURE DY 'l'OURISTS 

•rotal Spending 

Patter ns of Expenditure 

MULTIPLIER COEFFICIENTS 
Introduct ion 

Income Multiplier values 

D~r ect , Indirect and Induced Components 

Employment Multipliers 

Direct, Indirect and Induced Components 

THE ECONOMIC IMPACT OF TOURISM 

Introduction 

iii 

45 

45 

47 

48 

49 

50 

50 

51 

52 

52 

53 

53 

54 

55 

55 

56 

50 

63 

66 

66 

66 

67 

68 

72 

73 

73 

74 

80 

80 

81 

82 

82 

84 

8 5 

85 



9. 2. 

9. 3. 

9 . <1 . 

9.5. 
9 . 6 . 

9 . 7 . 
9 . 8 . 

9. 9. 

9. 10. 

10. 

10 . L 

10. 2. 

10. 3 . 

Income Generation 

Direct , Indirect and Induced Income 

/\ccommodation/Non-Accomrnodat,on Income 

Income Gcn.:!ration Per •rourist Night 
Employment Generation 

Direct: , Indirect and Induced Compvncnts 

llccomJnodation/Non-Accommodntion Employment 
E,nploymcnt : Socio Economic Impact 

Compariaon with Other Data 

CONCLUSlONS 
su::irnar. y of Main R<sults 

utilising tl1e Study Findings 

Use;; of tllc Inforr.ia:.ion 

APJ!, ·:·n1 X I 

liPI-·r:mn X JI 

/\l?P .-:~)DIX III 

CU,CULATION OF INCOM•: l',':9 EMPLOY/·lBl~T 

Sf.NS!'fIVI'1'Y 'i'Ef.TS ON \/,'.R,ABl,f:S 

SURVCY FORM5 

D :t Bl,IOGIU\i'll Y 

iv 

85 

85 

86 

87 

87 

90 

90 

91 

93 

97 

97 

98 

J.00 

104 

117 



Tl\!3LES 

l.l 

LIST OP TABLES AND FIGURES 

Increase i n Private Consumption and Employment 

Res ult ing from a $100 ~illion Incr ease 
in Exports 

3.1. Siinplif ied Tourist Economy : Input-Output 
•rable 

3.2. Sensitivity Tests of Changes in the Value 

of ?; i <tnd c 

5 . 1. Dis tance Crom Taupe to Adjacent Towns 

5 . 2. CoJ.-;_-,osition of Survey !'opulat:ion by 

5 . 3 . 

6. 1. 

6 . 2 . 

6 . 3. 

Accommodation •rype : General. Survey 

Hotel/Motel 'tourists : Questionnaire Da ta 

Taupo Borou9l1 - Changes in Employment 

Groups 1952-l,l 

'i'aupo Popul .iticn Growth 191)5--1982 

Retail Turnover per Capita and 

Rcstaurant~1otcl Employffient per 1000 

V 

Page 

2 

16 

30 

41 

47 

49 

57 

58 

Population Selected N.z. Urban ~reas 61 
6.5. International Arrivals for Holiday Purposes 

6 . 6 . 

6.7 . 

6 . 8. 

7.1. 

7 . 2 . 

7. 3. 

8 . 1 . 

8 . 2 . 

New Zealand April 1981-March 1982 

Motel Occupancy Rntes : Taupo 1979-80 

Hotel/11ote l 'l'our ists : Total Tourist Nights 

Tota l tourist Numbers 1981-82 

Tourist Expenditure Total by Tourist Type 

Tourist Expenditure Total Tourist Type 

by s ec tor 

Tourist Expenditure Pattern by Tour i st Type 

I ncome Multipliers by Tourist Type per $1 

of Expenditure 

Employme nt Multipliers by Tourist Type 

per $100 000 o f Expenditure 

9 . 1 . Income Generated All Tourist Types by 

Sector 

64 

64 

66 

68 

73 

77 

78 

81 

84 

88 



9.2. !"come Gc"era ted : Accommodation/Non-

9 . 4 . 

9 . 5 . 

9 . 6. 

9. 7 . 

9 . 8 . 

Accornmodation Income 

Income Generated - Per •rourist Night 

Emplo}•ment Gencratecl by Tourist Type 

Employment Generaterl by Sector 

EmpJoyment Generated 

Accommodation 
ACCOII\M)dat ion/Non·• 

Employment Generated: Unstandardised Jobs 

Employment of Persons in Fulltime L:ibour 

Force 

(l'i) Retail Trade ; ( 13 ) Restaurants 

and Hotels 

9.9. Occu1n1tioll 1-.inor Groupe in rulltime Labour 

Force 

vi 

88 

89 

89 

91 

91 

92 

95 

( A ) Sales Woi:kcrs ; (B) Service \•,oi:kers 96 

l'!GU!lF:S 

2.1. Re!:om:ce Utilisation !)ccision--Makin9 

Process 8 
4. J . Data Flow 'i'hrough t,:od<• l 36 

5.1. Map of Study Area ~2 

G. 1. Geographic Location 59 

6. 2. T,rnpo Meteorological Dilta 65 

G. 3 . Hotel/ Motel Tourists : Monthly Tourist Nights 69 

6. 4 Holiday HomE, Touri s ts : Monthly Touri st Nights 69 

6.5. Caravan and Camping Tourists : Monthly 

Tourist Nights 70 

6 . 6 . 

6 . 7 . 

7. l. 

Coach Tour Tourists : Monthly Tourist Vis its 

All Resident Tour i sts Monthly Tourist 

Nights 

All Res ide nt Tourists Expenditure Pattern 

70 

71 

79 



vii 

ACKNOWLEDGEMENTS 

During the course of research into the economic impact of 
tourism in Taupo the author received material , advice and 

u,·~:istancc from many pecple, or~i,,nisaU ons, government 

departments, and co1n1.v:?rc ial firms . This opportunity is 
therefore taken to thank th€ following people for their 

help: 

The business poople of Taupo (or their time in 

completiug quectlonna i res, intervi ews a nd general 
comments 

The Taupo Borough CounciJ for rccource suppor t and the 

advice of many staff mc~bers 

P Ald11ell , Foicst Research Instilute , Rotor ua 

B Steel, Tourist and !'ublicity Departr.icnt , 1/ellingtoll 

Secondly I ~ould like to expcess my gratitude to R Smith 

(Bus iness Stcdies) i~y supervisor and C Michelini 

(Economics) and R Le Heron (Geography ) my advisers at 

Massey Unive;rsity for theu comments , advice and sugg(,stions 
during the research period . 

'I'hirdly I would like to thank G Lee for his assistance 

with the computer work, Miss M Calkin my typist for her 

patient vigilance and CPT 8000 the word processor, which I 

consider a must for all thesis work . 

Lastly I thank my wife Lynette for her financial and 
unfailing moral support . 



vi ii 

Al3STRACT 

Tourism in Taupo is almost as old as t he town itself . 

During that time it has had a signif i cant impac t on the 

l ocal economy and is recognised expli c itly and supported as 

a gr.o'.lth indu::;try of the region . Por this sa1ne r ecognition 

and support to be afforded tourism at a national l evel the 

ind~stry must show that i t can compete effectivel y for the 

same hui,,an , physical ancl f i nanci.al resources which are 

sought af:ter by other sectors of the economy . 

l\ prerc~uisitc to formulating policies aim-.:d at sound 

resour.ce utilisation is information on the clcrnand (or and 

supply of those resource~ and the impact which their uoe has 

on the C?cono:ry , envii:onr.,er,t and s<>cicty . '!'h is ther;is 

examl"' :r.; the economic j mpucl: o( the touri::;m industry in 

't'aupo through estimation of the inco~,e anil c.nploym,~nt 

gen'e:rated by tour ism spcadi ng. Detu iled <ht\:« is obtained 

tlirough surv<"ys of the tou1: i &t population and local 

bus; ncsscs to 1.<.:vca l the size and pattern of spend i n9 and 

the ~ay in whicl1 this initial injection is circulated withi n 

and leaked fro•.1 the local econo::,y . Mul t iplier values f:or 

various tourist types arc estimated and these r eflect the 

propensity for ~ach tourist type to generate income and 

employment . Observations are mudc on t he uses t o which t he 

i nformation cc:n be put and the limitations of both t he model 

used and the i nformat i o n generated ai:e a lso examined . 



1 

1. INTRODUC'£ION ----
Tourism in New Zealand is one of the_growth sector s of the 

national economy. Central government r e cognises t hat t he 

economic benefits of e ncoura ging tourism are considerabl e . 

I t has been i dentified as a ctrategy to counter balance of 

payme nts problems and to reduce unemployment and dispar i ties 

in regiona l growth. (Quigley 1982) 

For 1980 it was estimated that the industry contr ibuted $800 

to $1000 million towards the country ' s Gross National 
Product. Betwee~ $500 and $600 million of this amount 

corr,ing from domc:;tic tourism, the remainder being foreign 

c~cl1ange contribution or i nv i sible exports . In 1980 jus t 

un<kr O!l(! haJ.[ of: a mill ion visi i.ors c;;.1~e to ile,i Zealand 

sustaining hot.cl cliains , motels , transpor tation linkages , 

t ouri~t attractions , restaurants, hisloric places, chops and 

t ravel agencies. In employment terms , the Tourism Advisory 

Co~ncil estimates Lhat in 1980 some 55 000 j obs can be 

d irectly attributed to tourism. (All data Quigl e y 1982) . 

C01,1parntive dat.:, [oi: 1976 cst.imatl'd that touri sm contributed 

$150 rn illion in fo ,:c ign exc:,.:rngc ear n i.ngs from 384 000 

o\·c•rsC'as visitors . (N. z. •roud st and Publicity 19 i6) 

While successive governinents have r ecog nised the benefits of 

the industry , t ourisin r emains the cinderella of developme11t 

portfolios . The commi tment to tourism in terms of monies 

adva nced, the status of the portfolio in government cab inets 

and the secondary role whic h tourism plays in the national 

growth strategy to wha t became known in 1980 as ' think big ' 

projects all reflect this position . 

Arquments for and against this strategy continue . Central 

to these arguments has been the implications for the best 

use of New Zealand ' s indigenous resources - physical, human 

and financial - on both intersectoral and intertemporal 

dimensions. Some of the energy projects which are part of 

' think big ' are in <lirect compet~tion with tourism in the 



use of physical (eg geothermal energy) and to a lesser 
~xtent human resources. 

Almost certai.nly the financing of these proj ects will lead 

to some degree of ' crowcli ng out' in the fi nancial sector , 
making inveslruent monies for tourism scarcer and more 
expensive . (See Dlinclc,r and Solow 1973) Why wasn ' t 

tourism i ncluded as a foca l point o f the growth strategy? 

2 

It would appeilr to measure favourably usi ng /lccepted growth 
yard sticks . For example the e~fect on private consumption 
and employment of an increase of $100 mil.l ion in tourism, 
agri.cultural and manufacturing exports has been estimated as 
follows : 

TBble 1,1 Increase in Private Consump~!on and Employment 
Resultinq from a $100 l'. i ll.ion IncH,a~" j n £;:port..~ 

_________ $,_l"-'00 1-lillion :i nci:e,ase 

Estimated 
Incr~ase 

Private 

Tourism Aqricult1irc ···---· · ---· J..anu ~nct:ur in9_ 

Consumpt i on 2 89 302 224 
( $ mill ion_,.) _______ ____ ______________ _ 

Empl oyrnen t 2 6 0 0 0 ______ :;.2~2--'-0-'-0-'-0 ______ --'1~7_0_0'--0---

Sou r ce B. E . R.L. 198 2b 

The tourism product i s home-grown and certa inly no less 
indigenous than the development of our energy resources . 
Tourism also has t he ability to earn overseas exchange while 
not making heavy demands on imports . (B . E . R.L. 1982b) 

Environmentally tourism is a ' clean ' industry and strong 
public support has been identified by one study for the 
continued growth of tour i sm. (Mings 1980) 

Perhaps it i s t he nature of the industry itsel f which has 
kept it in its present position . Tourism is both ubiquitous 
and ill- defined . It i s everywher.e using a wide range of 

resources but at the same time it is difficult to 
distinguish many parts of the tourist industry as being 



3 

separate from their role in non- tourism economic activities . 

Our national parks , accommodation , r.estaurants , transpor­

tation and all those who are empl oyed in these services are 

examples of the human and physical r esourc0;s involved in 

touri sm which have this dual function. As a conseque nce of 

this the inveslrn_11~ in or promotion of touris::i by the 

government at a scale necessar y to make it a leading 
gener.-,\.or o( national growth woulrl involve the co-operation 

and organisation of thousands of people and h undreds of 

organisations. There is little wonder then that the choice 

has beei1 to rely on the expertise of a few large companies 

to mancoe well-de[ined naLional resources and ten figure 

investGc11t sun1 than to spread the use of a r esource or 

inve~trr.cnt respoo1sibi li ty over a wide geograph i c area .:nc.1 

manaocmcnt system . 

The naLurc of the tourism product has rnean t also th '1 t unti l 

very _recently it has nol bcc11 recognised as a sector in 

national economic modelling or national accounts . (Min . of 

Work:; f, Develop:nci:t 1980; N. z. Ye.irbook 1981) 

l-!odcls !lave bee,, appl i ed to the national investment i mpac ts 

of agriculture , foresLry and energy developm,:,,1t . While 

these models could be adapted for use in the tourism sector 

or for as,:essing tile impact of a particular tourism injec­

tion or project no explicit mention i s given to the 

indu ,;try . Neither do the nation .. l input-output tables 

cus tomar ily included in the New Zealand Yea r book exhibit 

touri sm as a sector in its own right . However very r ecent 

work at Victori a University has sought to r emedy t his 

situation through a recomposi tion of the Official New 

Zealand Input Output Table 1976/77 whi c h has been especially 

devised to accent tourism sectors . (B . E. R. L. 1982a) 

The table is used to estimate capital requirements , 

employment genera tion , i mpor ts , foreign e xchange earnings 

and the contribution to Gross National Pr oduct o f fore i gn 
and domes tic tourism output or exports . It a l so compares 

how tllese inpu~ variables compar e with other· sector s of the 

economy for a given change i n output . 



4 

rn undertaking this study it has been explicitly realised 

that in order for decisions on resource allocation to be 

made the relative contribution that each sector makes to the 

economy must be measured. Also recognised is that before 
the tourist industry can demand greater cmisideration by the 

government , quantitative evidence of t o ur ism's potential 
cor,ti: ibution must be obtained . 

It will be national decision making which gives tourism a 

grc.iter share of nation.i l investment . However the impact of 

tt,osc decisions will not be evenly distribulcd and it is New 

Kealand ' s tourist regions tl1at will enjoy or suffer the out­

come. The ability o( these regional econo,rties to maximise 

the benefits of any tourism injection will depend on their 

self-sufficiency in all inputs Lo the tourism product . 

For the national economy the inter-regional flow of inputs 

nec .. c:sary to sustain a local tourist economy are a desirable 

and ~xpccted part of income and employment generating 

multiplier process . But for a regional economy the primary 

objective is to max i mise the circulation of the tourist 

injection within the regional economy . 

1'his study seeks to measure ho·,1 one tourism-oriented 

regional economy functions. It measures the initial receipt. 

of tourism expenditure and follows the successive rounds of 

spending in the economy which create income and employment . 

At the same time it is established how touclsm in Taupo 

benefits other regions t hrough the inter-reg ional flow of 

certain inputs . Overseas, income and empluyrnenl generation 

has usually been measured through the application of 

multiplier analysis at both national and sub-national 

levels . This form of analysis allows the est imation of both 

direct and indirect effects of a specified tour i sm injec­

tion. This study applies the multiplier technique to 

touri sm in the Taupo urban area and estimates income and 

employment multiplier values .