MGM2 Shortform

MGM2Shortform.XLS is a Microsoft Excel Workbook rendering of the MGM2 Paper and Pencil Form. This shortened version of the MGM2.XLS Workbook employs four visitor segments and uses aggregate spending averages and multipliers. The short form is designed to estimate economic impacts of all visitor spending based on recreation visits in the NPS Public Use Reports. 

Steps for Estimating Visitor Spending Impacts Using the MGM2 Short Form

A. Enter Short Form Inputs on the Spreadsheet

• Step 1: Enter recreation visits and segment shares
• Step 2: Enter parameters to convert visits to party nights
• Step 3: Enter visitor spending averages for each segment
• Step 4. Select Multipliers and economic ratios for the region

B.  Inspect and Interpret Outputs 

•     Output tables
•     Interpreting Outputs
•     FAQ's

C. Notes

• Segments
• Units
• Spending averages
• Multipliers

D. Download the Short Form Workbook - jump here to download the excel workbook.

Inputs on the form include:

Step 1. Recreation Visits and segment shares for four segments : 

• Local : visitors from the local area
• Non-Local Day Users: visitors from outside the region not staying overnight in the area
• Motel: visitors staying in motels, cabins, B&B's in the local area (inside or outside the park)
• Camp: visitors staying in campgrounds in the local area (inside or outside the park)

Enter recreation visits from the Public Use Report and estimate the percentage of visits by each of the four segments. Visits by each segment is computed by multiplying the segment shares by total recreation visits. 

Here is a sample table with 100,000 recreation visits distributed 25% to each segment. 

Step 2.  Parameters for converting from park visits to party nights

Visits should be converted to party nights in the area, as spending depends on how long the visitor stays in the area more so than how many times they enter the park or how much time is spent in the park.  There are four parameters that must be estimated for each segment to make the conversion from visits to party night:

• Length of stay in the area: (in nights, enter 1 for day visitors)  
• Party size: number of people in the party/spending unit (usually a vehicle or room/campsite).
• Re-entries to park: the number of visits that will be counted during the stay in the area. 
• Percent of activity/spending to attribute to the park: use these parameters to exclude spending by locals or to count only a portion of spending by any segment (e.g. if park visit isn't primary reason for the trip to the area).
  

The table below converts the 100,000 visits to 55,906 party nights in the area. Local visitors are excluded by entering 0% as the "percent of activity to include" in the local column. Visitors staying in motels are assumed to stay 2.7 nights with a party size of 2.3 and enter the park 2 times during their stay. Party nights are computed as (visits * length of stay)/(party size *  re-entries).

Step 3. Enter spending averages for each segment. 

 Different spending averages may be entered for each segment. Users may select from a set of default or "generic" spending averages that are provided or may adjust these to fit a particular park. The spending averages includeall spending while in the area expressed on a party night basis. Total spending in the local area is computed by multiplying the average spending per party per night by the number of party nights in the area.

The example below uses the generic "park-medium" spending averages. The generics may be chosen from a drop-down list. Total spending is $4.077 million for the 43,406 party nights included in the analysis. That is about $94 per party night, averaging across the three segments included.

Step 3: Choose spending averages: On a per party night basis
Select generics from dropdown list or enter manually
Segments	Local	NL-Day	Motel	Camp	Total
Average spending per party night	38.11	45.08	165.94	65.69
Total spending ($000's)	-	537	2,435	1,105	4,077
Percent	0%	13%	60%	27%	100%

Step 4. Choose Multipliers and Economic Ratios for the Region. 

Economic multipliers and ratios are used to convert visitor spending to sales, income, jobs, and value added in the region and to estimate secondary or "multiplier" effects. The Shortform includes 4 sets of "generic" multipliers representing regions of different size and economic diversity. The generic multipliers may be chosen from a drop-down list or users may enter their own values in the table. 

The example below chooses the generic multipliers for a rural region. 

Step 4: Choose Regional economic multipliers
Select from dropdown list by type of region
Direct effect ratios		Total effect multipliers
Capture rate	74%	Sales Type SAM	1.32
Income/sales	0.34	Total Income/direct sales	0.45
Jobs/ MMsales	31.46	Total jobs/direct sales	36.76
Value added/sales	0.51	Total Value added/direct sales	0.71

Step 5. Inspect Outputs

Economic impacts of the visitor spending on the region's economy are summarized in an output table. The MGM2 model first estimates the portion of visitor spending that is captured by the local economy. It then estimates the direct effects of this spending in terms of sales, personal income, jobs, and value added. Total effects are the direct effects plus the secondary or multiplier effects. 

Completing the example, 74% ($3.036 million) of the $ 4 million in spending was captured by the local economy as direct sales. These sales generated $ 1.032 million in personal income, $ 1.559 million in value added and supported 96 jobs. With secondary effects, the total impact is $ 4.013 million in sales, $ 1.358 in personal income, $ 2.161 in value added, and 112 jobs. The contribution of spending by each segment may be gleaned from the table. 

Interpreting the results

It is important that the findings be clearly understood and explained. This requires an understanding of the assumptions and inputs as well as the meaning of the outputs. 

Inputs and assumptions: The results in the example here are based on :

• 75,000 recreation visits, distributed 33% to each of  the three non-local segments (locals are excluded)
• 43,406 party nights in the area, computed from visits based on the length of stay, party size and re-entry assumptions.
• The per party per night spending averages selected (in this case medium park generic spending profiles). Dividing total spending by total party nights provides an overall average of about $94 per party per night. Note that this is a weighted average of the three segment spending averages, with each segment weighted in proportion to their contribution to party nights.
• Multipliers reflect a typical rural economy (use rural generic multipliers). 74% of spending is captured as direct sales and the sales multiplier is 1.32. There are 31.5 direct jobs per million in sales, $.34 of every dollar of sales represents personal income to the region and $ .51 is direct value added.

The aggregate multipliers are based on a typical spending pattern of park visitors and 1996 IMPLAN models.  The generic multipliers are averages across 20-40 similar regions. These are IMPLAN Type SAM multipliers , which are more conservative as the estimates of induced effects exclude contributions to retirement programs and income of workers who commute from outside the region.

Outputs:  Visitor spending leads to sales in the region and the associated direct effects (jobs, income, value added) in the businesses that receive money directly from visitors (motels, restaurants, attractions, retail stores). Secondary or multiplier effects are of two kinds. Indirect effects result from tourist businesses buying goods and services from other "backward linked" industries in the region, while induced effects results from households re-spending the income earned from visitor spending in the region.  Secondary effects may be estimated separately by subtracting the direct effects from totals. The four measures of economic impacts are:

• Sales are the sales of goods and services by firms located within the region
• Personal income represents wage and salaries paid by these firms (including sole proprietor's income and worker benefits).
• Value added includes personal income plus rents and profits plus indirect business taxes.
• Jobs are the number of jobs supported by these sales

Some frequently asked questions:

1. Why are direct sales less than total spending? Not all spending by visitors is captured by the local economy. The capture rate measures the percentage of spending captured by the region as direct sales. The spending that is not captured is the "producer prices" of imported goods bought by visitors at retail. Visitor spending is in "purchaser prices" which equal the producer prices (price at the factory) plus margins associated with retail store, wholesaler and shipper. If a visitor buys a camera for $100 that is not made in the local area, not all of the $100 spent accrues to the region as direct sales. If retail margin is 40% then $40 accrues to the retailer, but the other $60 immediately leaks out of the region (mostly to where the camera is manufactured and some to where wholesaler and shipping firms are located). The direct sales effect in this case is $40, not $100, and the multiplier effects are computed based on the $40 captured by the region. Capture rates vary between 70 and 90% depending on the region and the kinds of goods purchased by visitors.

2. Can I add the various impacts? No. The total effects include direct plus secondary effects so you should not add these together. Secondary effects may be computed as total effects - direct effects. The economic measures (sales, income, jobs, value added) are different ways of measuring the economic effects resulting from the given sales. These should not be added as personal income is a part of value added and value added is a part of sales. The example below shows the relationships among these measures, using the direct effects results in the example above. Adding profits and rents and indirect business taxes to personal income yields value added. Value added is the contribution of the region to gross state or national product. The additional $1,477 represents goods and services bought from other firms in order to produce the $3,036 in total sales. These sales support an estimated 96 jobs. 

 Sample Impacts to Illustrate Relations between the Impact Measures

If the $3.036 million were all in hotel sales, the personal income represents wages and salaries paid by the hotels for the estimated 96 hotel jobs. The hotels purchase $1,477 in linen supply, utilities, and other goods and services to produce the $3.036 million in hotel sales. The $1,032 in personal income stimulates the induced part of multiplier effects, while the $1,477 in intermediate sales stimulates the indirect effects. 

If instead, we were itemizing impacts of retail purchases, we might begin with $6 million in visitor spending, of which $3.016 million is captured as retail margins by the retail trade sector. If these goods are not locally made and the wholesaler and shipper also lie outside the study region, the other $3 million is not captured by the local economy. The profile above would then represent economic activity in the retail trade sector. In this case, the intermediate sales are the costs of operating the retail store, NOT the cost of goods sold. 

Downloading Section

 To run the MGM2 Shorform, 

1. Download the MGM2 Short Form Workbook

2. Open the Workbook in Excel, choose enable macros when opening

3. Follow the instructions

The MGM2Shortform.xls Workbook has five pages

Instructions
MGMShort - The main worksheet
Defaults - containing default spending and multiplier tables
Input Summary
Output Summary

Notes.

1. Segments. The MGM2 Shortform divides visitors into four segments to explain differences in spending. 

• Local : visitors from the local area. The "local area" is usually a radius of 30-120 miles around the park and is  based on the region of interest. Spending by local residents may be excluded from the analysis by entering 0% in the attribution row.
• Non-Local Day Users: visitors from outside the region not staying overnight in the area
• Motel: visitors staying in motels, cabins, B&B's in the local area (inside or outside the park)
• Camp: visitors staying in campgrounds in the local area (inside or outside the park)

Recreation Visits may be taken directly from the Public Use Reports.   

The percentage of visitors in each segment must be estimated from park visitor surveys or manager judgment.

Note that park overnight stay data is measured in person nights inside the park, not visits. The NPS overnight stay data does not cover visitors staying overnight outside the park. The NPSConvert routine may be used to help convert park visit and overnight stay data to segment shares. 

Visitors staying with friends and relatives in the area should be treated as Non-Local Day Users. Seasonal residents of the region may be treated as local residents or as non-local day users depending on whether their spending is to be included or not. 

2. Unit of analysis = party night

As spending profiles are measured on a party night (party day for day trips) basis, visits must be converted to these units. Conversion parameters may be estimated from visitor surveys or manager judgment. The "attribution percentages" may be used to exclude some visits (and associated spending) from the analysis. For example, (1) enter 0% for locals to exclude all local visitors, (2) enter 50% for a particular segment if only half of the trips to the area were primarily to visit the park (this will only count half of their visits and hence half of the spending). 

• Length of stay in the area: (in nights, enter 1 for day visitors)  converts from trips to nights (days).
• Party size: number of people in the party converts from per person to per party. 
• Re-entries to park. This parameter adjusts for visitors who may be counted more than once during a stay in the area.
• Percent of activity/spending to attribute to the park. 

For overnight visitors, enter length of stay as the number of nights in the area. Lodging expense should then be the cost of one night's lodging and other expenses should also be on a per night basis. For visitors not staying overnight, enter length of stay = 1, spending represents one day's spending.

3. Spending averages are on a party night basis or party day basis for day visitors. All spending in the local area defined by the study region is included. A distinct average is entered for each segment to capture differences in spending across visitor subgroups. The MGM2.xls model itemizes spending into 12 categories to provide more precise estimates of spending and impacts. The short form uses an overall average for each segment and the multipliers and ratios are based on a "typical" visitor spending pattern.

The "generic" spending profiles are based on a number of recent NPS visitor surveys. Low, medium and high spending profiles were developed for natural resource-based parks and for historic sites and monuments. Users may adjust these to fit a particular park or substitute spending averages from a recent survey. Be sure they are on a party-night basis. 

4. Multipliers convert spending to direct sales, income, jobs and value added and estimate multiplier effects. Four sets of "generic multipliers are provided on the Short Form. These generic multipliers represent regions of increasing size and economic development

1. rural areas with populations usually below 50,000
2. small metro regions with populations up to 500,000
3. larger metro regions with populations up to 1 million
4. state and larger regions with populations over 1 million

The Short Form uses aggregate multipliers for sales, personal income, jobs, and value added. Each set of multipliers is an average across a number of similar regions and assumes a typical visitor spending pattern. MGM2.xls uses sector-specific multipliers to better capture differences across distinct economic sectors.

The capture rate is the percentage of spending captured by the local economy as direct sales. Usually 10-25% of spending leaks out immediately to cover the costs of imported goods (not made in the local area) purchased at retail by visitors (e.g. gas, groceries, souvenirs). In most cases only the retail margin on retail purchases accrues to the local economy.

Direct effect multipliers convert direct sales to personal income (wages and salaries), jobs and value added. For example, in rural areas there are about 32 jobs per million dollars in sales in tourism-related businesses. Therefore $3 million in direct sales yields about 96 jobs.

Total effect multipliers include both direct and secondary effects. They are expressed as ratios of the total effects to direct sales. For example, the total effect job multiplier for a typical rural area is 37 jobs per million in direct sales. Hence, $3 million in sales has a total job impact of about 111 jobs. The Type II sales multiplier is the one most commonly cited. MGM2 multipliers are based on models  estimated with the IMPLAN system using their "type SAM" multipliers. These are slightly lower than traditional Type 2 multipliers as they use a more conservative approach in estimating induced effects (they omit income by workers who commute from outside the region and also exclude contributions to retirement programs). The MGM2 default Type SAM sales multiplier for a rural region is 1.32. The sales multiplier increases to 1.44 for small metro, 1.55 for larger metro, and 1.62 for statewide regions. The sales multiplier may be as low as 1.2 for small rural economies and as high as 2.0 for some large self-sufficient regions.