Stability of Input—Output Coefficients by Capacity Utilization for Short-Term Tourism Demand Fluctuation

Abstract

The ability to portray accurately the regional economic impacts of short-term tourism demand rests on the resemblances between the long-run input–output (IO) technical coefficients and a short-term production function of business sectors. The purpose of this research was to investigate the stability of cost structure by capacity utilization in the tourism industry, using the accommodation sector in Taiwan as an example. Panel data consisting of firm-level financial information based on 13 individual cost categories from 2000 to 2009 were analysed to reveal the magnitude and direction of cost structure changes with respect to occupancy rate. The results indicated that income multipliers and profit multipliers fluctuated substantially but compensated for each other, while IO technical coefficients were very stable. In a situation involving a tourism event, type I and type II sales multipliers and the value added multipliers of the accommodation sector remained relatively stable, but the standard income multipliers were greatly overestimated, or underestimated for tourism recession scenarios. Applying a regional IO model to estimate short-term tourism demand should therefore take into consideration the substitution pattern between personal income and business profits.