Money Generation Model Version 2

MGM2.XLS

The full-featured version of the MGM2 model is a multi-page Excel 7.0 workbook. The MGM2 model estimates the direct and total economic impacts of visitor spending based on the following simple model:

Economic Impact = Visits * Spending * Multiplier

The three primary inputs are:

•    The number and types of visits : up to 12 distinct visitor segments or types of visits may be identified.
•     A spending profile for each segment that itemizes average spending within 12 standard spending categories
•     A set of sector specific multipliers representing the region around the park for which impacts are desired

The model estimates direct effects of visitor spending for the primary tourism-related sectors of the economy and total effects across all sectors. Impacts are summarized in terms of sales, personal income, value added and jobs. Impacts may be estimated for individual visitor segments. The model can be used to estimate economic impacts of current visitors or to evaluate management alternatives. The spending and associated economic impacts of any change in the number or types of visitors may be evaluated with MGM2. 

Features of the MGM2 model include:

• Park visitor segments help explain variations in impacts across parks and management alternatives based on the kinds of visitors attracted. 
• Spending profiles are based on surveys of park visitors and itemize spending in 12 categories.
• Sector-specific economic ratios and multipliers capture different effects of spending in different sectors
• Model users may choose from sets of "generic" spending profiles and multipliers, import custom data for individual parks/regions,  enter their own local data, or edit any of these datasets to fit a particular application.
• MGM2 multipliers are based on IMPLAN models for regions down to the local area around a park . Multipliers may be imported from any IMPLAN Pro 2.0 model.
• Built in price indices can be used to adjust spending data and job to sales ratios to the current year.
• The model will compute tax impacts if appropriate state and local tax rates are entered.
• MGM2 produces detailed estimates of the direct economic effects by economic sector
• Impacts are expressed in terms of sales, personal income, value added and jobs.
• Built-in Excel macros automate most of the procedures and calculations.
• Results may be printed or graphed using built-in macros or standard Excel procedures.
• Companion utilities are available to convert park visits to party nights and to import multipliers from IMPLAN Pro 2.0 models.

The MGM2 program is briefly explained below using samples of the primary input and output tables. More complete documentation and background on economic impact concepts and procedures are provided in the software manuals (See the download section). The primary MGM2 inputs (spending averages, visits, and multipliers) are each entered on a separate page and the outputs are summarized in four tables (total spending, direct effects, direct and total effects, and marginal impacts per unit change in visits or spending). 

The basic steps are:

1. Enter spending averages for a set of segments
2. Enter number of visits by each segment
3. Choose multipliers for the region
4. Inspect Outputs: Total spending, Direct and Total Effects
5. Interpret the results

Spending Page 

On the spending page, spending profiles are entered on a party night basis for a set of visitor segments. The first step in MGM2 is to choose a set of visitor segments suitable for the problem and to estimate a spending profile for each segment.  Parks may develop their own custom visitor segments and spending data, may choose from  sets of "generic" spending data, or may adapt spending data from another park.  MGM2 includes six sets of generic spending data - "low", "medium", and "high" spending profiles for parks and for historic sites. Each spending dataset itemizes spending in 12 standard spending categories that are matched with economic sectors in the MGM2 model. 

Table 1 below shows the default "medium generic" spending profiles for parks. Spending profiles are provided for eight lodging segments.  Buttons are provided to price adjust the figures, to import other spending data sets, to edit the spending data, or to save a given spending data set. 

Visits Page 

The number of visits for each segment are entered on the Visits Page.  Visits for each segment may be entered as shares of the total or in party nights. The example represents 100,000 party nights with the largest segments being local day users, day users from outside the local region and visitor staying outside the park in motels. A companion utility is provided for converting recreation visit counts to party nights. The conversion routine uses park overnight stay data to estimate shares for visitors staying overnight inside the park (Motel-In, Camp-In and backcountry segments). Model users must provide shares to distinguish between the five "park day visitors", some of whom are staying overnight outside the park in the local area. Party size, length of stay and park re-entry parameters are used to convert recreation visits to party nights.

VFR stands for visiting friends and relatives. In MGM2, this segment covers any visitors from outside the local area staying overnight in the local area in private homes (relatives, seasonal homes, etc.).

 Multipliers 

MGM2 uses sets of sector specific multipliers to convert visitor spending to the associated direct and secondary sales, income, jobs and value added.  Twelve sectors cover the primary ones receiving visitor spending. The multipliers in Table 3 below are for a "generic" rural region. These multipliers capture the economic structure of the region around the park. Four sets of generic multipliers may be chosen to represent either a rural area, a small metropolitan area (up to 500,000 in population) , a larger metropolitan area (up to 1 million population), or a larger region including state or multi-state regions. Custom multiplier sets for individual regions (groupings of counties around a park) may also be imported to MGM2. A companion utility will extract the required multipliers from any IMPLAN Pro 2.0 model. 

MGM2 OUTPUTS

Total spending by segment and spending category (Table 4) are computed by multiplying the spending profiles in Table 1 by the number of visits in Table 2. Spending is estimated by spending category and visitor segments. This detail reveals which visitors contribute most to the local economy and also which local economic sectors benefit.

Total Spending

Multipliers and economic ratios are applied to the total spending column in Table 4 to estimate direct and total economic effects. Direct effects are reported by economic sector in Table 5.  In Table 6, the secondary effects are added to the direct effects to yield total effects  and the aggregate multipliers are calculated.  Table 7 estimates economic impacts per unit (000's) change in visits or spending. 

Direct Effects

MGM2 reports impacts in terms of four principal measures of economic activity:

1.  Sales are the sales of firms within the region to park visitors. As explained below under "margining", not all visitor spending     accrues to the region as direct sales.

2.  Jobs are the number of jobs in the region supported by the visitor spending. Job estimates are not full time equivalents, but include part time and seasonal positions. 

3.  Personal income includes wage and salary income, proprietor's income and employee benefits.

4. Value added is a commonly used measure of the contribution of an industry or region to gross national or gross state product. Value added is personal income plus rents and profits, plus indirect business taxes. As the name implies, it is the "value added" by the region to the final good or service being produced. Value added can also be defined as the final price of the good or service minus the costs of all of the non-labor inputs to production.

Direct effects are the sales, income and jobs within those firms selling directly to visitors. The retail and wholesale trade sectors capture the margins on goods bought by visitors, while only locally produced goods contribute to local manufacturing sectors. The majority of the direct effects usually accrue to the lodging, restaurant, amusements/attractions, and retail trade sectors.  

The direct effects on the local economy for this example are 175 jobs, $5.658 million in sales, $1.922 million in personal income and $2.9 million in value added. The table shows the distribution of these effects across economic sectors.

Total Effects

Total effects are computed by applying total effects multipliers from Table 3 to the direct sales in Table 5.  Aggregate multipliers are then computed as the ratio of the total effects to the direct effects. Secondary effects may be computed by subtracting the direct effects from the total effects (total effect = direct effect + secondary effect). As MGM2 uses sector-specific multipliers, it cannot determine which sectors capture the secondary effects, but generally the secondary effects will be spread widely across a variety of economic sectors in the region. 

The capture rate is the ratio of direct sales to total spending. Only spending that is captured by the local economy is included as direct sales and multiplier effects only apply to these sales.  In the above example 78% of the $7.3 million in visitor spending is captured as direct sales ($5.7 million in direct sales). The $1.6 million in spending that does not appear as direct sales represents goods (gas, groceries, souvenirs) bought by visitors that are not made locally. In most cases, only the retail margins on these purchases accrue to the local economy. These margins are reported in the retail trade sector in Table 5. 

Marginal Impacts

Table 7 estimates the change in the local economy per unit change in either party nights or visitor spending. These figures can be used to quickly estimate changes associated with different scales, for example attracting an addition 100,000 party nights or another 200,000 party nights. The marginal changes in Table 7 are based on the given distribution of visitors across segments and the spending and multiplier values selected in Tables 1-3. Changing the mix of visitors, spending patterns or multipliers will alter these values.

Interpreting Results

Here's a brief explanation of the sample results in the tables above. See the MGM2 manuals for further details.

• These visitors spent  $7.3 million in the local area (Table 4).  

• About three fourths (78%) of the spending ($5.6 million) was captured as direct sales by the local economy (Table 6) . Note - The $1.7 million not captured are goods bought by visitors that are not made locally - only the retail margin on these purchases is captured within the retail trade sector.   

• Visitor spending has a direct effect on the local economy of $5.6 million in sales, $1.9 million in personal income (wages, salaries and proprietor's income), $2.9 million in value added (all income, plus rents and profits and indirect business taxes), and 175 jobs (Table 5).

• With multiplier effects, total impacts are $7.5 million in sales, $2.5 million in personal income, and $4 million in value added. Visitor spending supports a total of  205 jobs, 175 direct jobs in tourism-related businesses and 30 additional jobs through secondary effects (Table 6). Secondary effects include indirect ( economic activity in backward linked industries that sell goods and services to tourism businesses) , and induced effects (economic activity stimulated by household spending of income earned either directly or indirectly from visitor spending). 

• The aggregate sales multiplier for this region is 1.32. This means that $ .32 of secondary sales results from every dollar of direct sales.

• A typical visitor spends $ 73  per party per night in the local area. Visitors staying overnight in motels outside the park average $163 per party-night in spending including $80 for their room. These visitors account for 20% of the party nights and 45% of all spending. Contributions of other segments and differences in their spending patterns may be seen in Tables 1 and 4. 

• Of the 175 direct jobs resulting from the visitor spending, 56 are in the hotel sector (includes camping), 61 in restaurants, 35 in retail trade and 20 in attractions and amusements. 

Notes

• Impacts for a particular segment may be obtained by setting visits in all other segments to zero. Locals may be excluded by setting local visits to zero. Impacts of any mix of visitor segments may be quickly evaluated on the spreadsheet.

• The detail in the spending profiles and segments helps assess the face validity of the spending data. For example, the average spent on motels for the motel segment on a per party-night basis should be the local average room rate. The detail also makes it easier to adjust spending figures to fit the local area, e.g. a park may raise or lower the spending averages for amusements, restaurants or souvenirs based on spending opportunities and prices in the local area.

• Different sets of multipliers may be imported to capture different types of local economies.

• Spending figures and results may be updated from year to year by price adjusting spending and adjusting visits. 

• If IMPLAN data are available for the region around the park, multipliers specific to the region may be imported and used.

• Parks may construct their own spending datasets based on visitor surveys or other sources. Over time these spending databases will be added to the MGM2 spending datasets.

• With all of the results in a spreadsheet format, tables may be readily converted to charts or exported into reports or  presentations.

Go To the MGM2 Short Form Quick Tour

Download MGM2 Workbooks

Goto our  download section   for updates about the model or to download the software and manuals. Manuals are in Acrobat PDF format. They include a glossary of economic impact terms, an explanation of the MGM2 model, a software user's manual,  technical description and sample applications. Further guidance is also provided for estimating spending profiles, converting park visits to party nights, and importing multipliers from IMPLAN.  More general information may be found at our economic impacts of recreation and tourism website. 

Contact Information: Direct any questions, problems or comments to Daniel Stynes or Dennis Propst.  Please contact us if you have problems downloading files or any questions about the MGM2 model. 

E-mail :  Daniel Stynes ,  DennisPropst
Phone : (517)-353 5190 ext 109 (Stynes)   or  ext 119 (Propst)
FAX: (517)-432-3597 
Mail: Department of Park, Recreation and Tourism Resources, Michigan State University, East Lansing, Michigan 48824-1222.