A comparative study on the impact of tourism in Finland and Spain: Economic key aspects of tourism

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A comparative study on the impact of tourism in Finland and Spain

Economic key aspects of tourism

Rebecka Kronkvist

Degree Thesis for Bachelor Business Administration Degree Program for International Trade

Vaasa 2021

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EXAMENSARBETE

Författare: Rebecka Kronkvist Utbildning och ort: Tradenom, Vasa Inriktning: Internationell Handel

Handledare: Rosmeriany Nahan-Suomela

Titel: En jämförelsestudie om turismens påverkan i Finland och Spanien

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Datum: 25.4.2021 Sidantal: 34

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Abstrakt

Syftet med detta slutarbete är att ge en bättre insyn i skillnaderna mellan turismens inverkan på ekonomin i den finländska turismen i jämförelse med spanska turismen. Konsumeringen inom turismen har en kedjereaktion och påverkar ekonomin inom ett land på fler områden förutom den direkta turismsektorn.

Arbetet bestod av jämförelse mellan två landsprofiler, Finland och Spanien, för att ge en bättre helhetsbild över turismens inverkan i länderna. Turismens ekonomiska aspekt samt turismens olikheter jämfördes i ett skilt kapitel för att ge läsaren en helhetsuppfattning över avvikelserna mellan länderna. Arbetet bestod även av en regional kvalitativ undersökning, framställd av intervjuer med två av Vasa regions nyckelaktörer inom sektorn. Intervjuerna behandlade följderna av viruset Covid-19 inom den regionala turistsektorn i Vasa, Finland. Utförande av intervjuerna har framställts för att ge en omfattande inblick i turismens ekonomiska ställning.

Arbetet gav en insyn i hur turismen ser ut, samt dess betydelsen för de två länderna. I resultatet framkom det att turismen stöder en betydlig del av ländernas nationella ekonomi genom att öka landets sysselsättning, produktion, försäljning, samt andra direkta och indirekta tjänster.

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Språk: engelska

Nyckelord: turism, Finland, Spanien, ekonomisk inverkan

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OPINNÄYTETYÖ

Tekijä: Rebecka Kronkvist

Koulutus ja paikkakunta: Liiketalous, Vaasa Suuntautumisvaihtoehto: Kansainvälinen kauppa Ohjaaja: Rosmeriany Nahan-Suomela

Nimike: Vertaileva tutkimus turismin vaikutuksista Suomessa ja Espanjassa

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Päivämäärä: 25.4.2021 Sivumäärä: 34

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Tiivistelmä

Tämän opinnäytetyön tarkoituksena oli saada parempi käsitys eri taloudellisista vaikutuksista suomalaiseen ja espanjalaiseen turismiin. Kulutuksella turismin piirissä on niin sanottu ketjureaktio, joka vaikuttaa maan monen eri toimialan toimintaan, eikä ainoastaan suoraan turismisektoriin.

Opinnäytetyö käsittää vertailun kahden maan välillä, Suomen ja Espanjan. Tarkoituksena on, että lukija saisi paremman kokonaiskuvan siitä, miten turismi vaikuttaa kyseisiin maihin. Erillisessä luvussa vertaillaan maiden turismin eroavaisuuksia sekä turismin vaikutusta taloudellisesta näkökulmasta. Opinnäytetyö koostuu myös alueellisesta tutkimuksesta, jossa on haastateltu kahta Vaasan alueen suurinta turismialan toimijaa. Haastatteluissa käytiin läpi miten Covid-19-virus on vaikuttanut seudun turismisektoriin.

Lukija saa konkreettisemman ymmärryksen siitä, miltä turismi näyttää, sekä sen tärkeydestä.

Vertailussa käy ilmi, kuinka paljon turismi vaikuttaa maiden kansantalouteen, nostamalla maan työllisyyttä, tuotantoa, myyntiä sekä muita suoria ja epäsuoria palveluja.

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Kieli: englanti

Avainsanat: matkailu, Suomi, Espanja, taloudellinen vaikutus

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BACHELOR’S THESIS Author: Rebecka Kronkvist

Degree Programme: Business Administration Specialization: International Business

Supervisor: Rosmeriany Nahan-Suomela

Title: A comparative study on the impact of tourism in Finland and Spain

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Date: 25.4.2021 Number of pages: 34

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Abstract

The goal of this thesis is to get a better understanding of the economic impact of tourism by comparing tourism in Finland and Spain. Tourist consumption has a multiplier effect on other branches of the economy besides the ones directly related to tourism. This makes that tourism has a larger effect on the economy than one might think at first.

The thesis consists of a comparison of country profiles from Finland and Spain, to give a better picture of the economic impact of tourism in each country. The economic impact is then compared in a separate chapter to provide a better overview of the key areas and their numbers. The thesis also consists of regional qualitative research, done by interviewing two of the Vaasa region's key tourist companies. The interviews focus on how a regional tourist sector has been affected by the Covid-19 pandemic, by looking at the effect it has had on local tourist companies. The interviews were collected to provide a more thorough insight into the position tourism has.

To summarise, this work seeks to provide a better understanding of what tourism looks like from an economic point of view and the general importance of tourism in Spain and Finland. It is clear that tourism has an important role in both countries' economies, as it has a positive contribution to for example employment, production, and sales, both directly or indirectly

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Language: English

Keywords: tourism, Finland, Spain, economic impact

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1 Introduction

This thesis was created to show the economic benefits and the importance of tourism and to give a better understanding of its economic importance. The purpose of the thesis is to provide a better understanding of the economic importance that tourism has. The inspiration for this thesis arose during my exchange in Spain when I realized some of the various ways tourism can affect different countries. I have been to Spain as a tourist many times, but after living there and noticing the impact tourism had in Spain, I got inspired to compare it to my home country, Finland.

Tourism has grown over the years and has become an important factor in most country's economies, as it helps consumption and production growth, among other things.

International and domestic travel has in recent years become available to more people than ever and both traveling for business purposes and recreational travel have become increasingly popular and are now a normalized standard for many people. Many see tourism as just a vacation where the tourists only contribute to the destination's economy with the money they spent directly on different tourist-related shops and activities.

However, tourism affects the economy and the region much more than in just this direct manner, which is what this thesis will explain further and look at deeper than just the surface level impact from direct spending.

1.1 Purpose of research

The purpose of this thesis is to highlight the many ways tourism can impact a country's economy and local communities. Tourism generates more money and benefits a country in more ways than meets the eye and this thesis was written to give a better view of the economic perspective of tourism. This is done by looking at how tourism helps the economy grow and what tourism looks like in two different countries, as well as regional research of the effect of Covid-19 in purpose to show the effects better on a more local level.

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1.2 Methodology and delimitations

Tourism is a very broad sector and the work will therefore be limited. The country profiles are mainly focused on the economic impact, growth, tourist consumption, inbound tourism, and employment regarding tourism. The country analysis does not include the events of the pandemic Covid-19 to be able to provide a view of what tourism looked like before the pandemic and to prevent repetition, as the regional research will be focused on the effect of the pandemic. This research was done to present the economic effects on regional and company-based levels by looking at how companies have been affected by the virus, specifically in the region of Vaasa, Finland. The interview-based research is limited to the perspective of Finland and does not include a perspective of Spain.

The study on the regional analysis was done through qualitative research in the forms of interviews and other materials have been collected from various online sources, mainly governmental websites and statistic centers. The material was collected in Swedish, Finnish, English, and Spanish, as the official national languages are different in the countries that were inquired and the languages of the available documents therefore also differed.

1.3 Thesis structure

This work consists of five main parts: general information about the economic impact of tourism, the Finnish country profile, the Spanish country profile, a comparison of the main economic differences between the countries, and lastly the interview-based research, concluding with a summary of the entire work. The first part of the thesis provides a better understanding of the different ways tourism can affect a country economically and the chain effect it can create. The second and third parts, the two country profiles, will provide statistics and key information on the country's tourism to create a better view of how tourism and tourist spending look in the countries. The following part is the comparison, which consists of a demonstration of the main statistics and information to highlight some of the differences. The last part presents the regional research of the interview, conducted with the CEOs of two Vaasa-based companies and the effects they have experienced from the Covid-19 pandemic, which then also are reflected on from a regional and in a general point of view.

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2 The economic impact of tourism

Tourism is an important source of income for the economy, and it contributes to more than just direct purchases. Tourism has a multiplier effect, which means that the industry affects the economy in other industries as well. One example of the multiplier effect can be seen in Finland where every one euro spent on tourism in Finland affects the other sectors by adding a value of 56 cents to them (Visit Finland, 2019a).

Tourism helps the economy in a country in multiple ways and has a great regional and local economic benefit. Tourism can for example help with creating jobs and reducing unemployment, increasing production and consumption of goods and services, contributing to higher profits, affecting tax revenues, increasing sales, help companies grow, and help generate a higher local income. Tourism also has a strong direct impact on amusement parks, retail trade, restaurants, accommodation, and transport as tourists have a high use of these sectors.

The economic effects of tourism can be defined as direct, indirect and induced effects of tourism, to better describe the level of economic effects. The direct effects are defined as the changes that immediately are related to the production charges, for example, a change in overnight stays affecting a hotel's sales directly. The indirect effects are re-spending of the tourist industries that happens in backward-linked industries, like for example when a hotel buys goods and services from suppliers. Induced effects are household income generated from indirect or direct tourism which is then in turn spent locally on anything from household to transport, services, and goods. (Stynes, n.d.)

The secondary impact of tourism is not as noticeable as it is in the direct tourist industries like hotels and restaurants, but tourism still affects other indirect industries greatly.

Tourism affects almost all economic sectors due to secondary effects that the industry creates, as it causes a kind of chain effect. Many other sectors are therefore affected as well by the growth or reduction of tourism, especially on a regional level. Tourism for example indirectly impacts the agricultural and construction sectors, as a change in the normal flow of tourism will create new demand, as there will be a change in the number of people in the area. This means that the food production will have to be altered to keep up

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with the new demand and there might also be a new need for hotels or improved roadwork as more people are visiting the area. The increase in production will in its turn affect the employment sector as there will be a higher demand for basic needs, services and products, which in return requires more employees to keep up with the higher demand. (Stynes, n.d.) Daniel J. Stynes is one of many who have studied the impact of tourism and he brings up the benefits and theories of the effects in his paper Economic Impacts of Tourism. In his paper, Stynes illustrates the impact of tourism by using an example with a fictional group of 100 tourists to show how their spending influences the local economy, where the results are fairly typical to what studies of economic impacts of tourism might find. He mentions a scenario where the 100 tourists spend $100 per day, which equals to spendings of $10 000 in the area, per day. He then continues the example by having the same flow continue over 100 days leading up to 1 million in sales provided from external sources in the area. Stynes then argues that about 30% would leak out to the region due to purchases that are not made locally, meaning that $700 000 would remain from direct sales. This would in turn support 20 jobs directly in the tourist industry and yield a potential income of $350 000 within the tourist industry. (Stynes, n.d.)

Stynes states that tourism has beneficial contributions such as employment and increased production in the direct industry and through secondary effects adding to the economy. He explains these secondary effects by continuing the example pointing out that the tourist industry then pays out wages and buys services and goods from other companies with the money generated from the $350 000 income. (Stynes, n.d.)

The money spent by tourism does therefore not only benefit the tourist industries, but also other industries in a region. A way to capture the secondary effects from an economic perspective is through the multiplier effect. Stynes (n.d.) demonstrates the multiplayer effect, with the previous example, explaining that the direct sales of $700 000 could create a total sale of $1.4 million in sales through the secondary effects. This could be the case if the multiplier effect would mean that every one dollar generated in direct sales creates secondary sales worth another dollar (Stynes, n.d.). This would create additional employment and income over the direct impact from the tourist industries, adding up to a total of 35 jobs and an income of $650 000 along with the 1.4 million in sales (Stynes, n.d.).

There are multiple methods of estimating the economic impact of tourism on different

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levels, besides the multiplier effect, with some of the most common methods being the input-output model, general equilibrium model, social accounting matrix and tourism satellite accounting.

Tourism does not only affect the different economic sectors but can also benefit the locals by getting the government to promote tourism-related activities and projects. Tourism can impact governmental decisions on projects concerning regional and local areas, which can be everything from increasing and stimulating cultural events to better public transportation, which then can increase the living standard and comfort for the locals.

However, tourism can have both negative and positive effects, as it can for example affect taxes, inflate prices, and impact quality both negatively and positively. A high flow of tourism can for example negatively impact the locals if it drags up taxes, forcing locals to pay more instead of less. Other negative economic effects are things such as economic leakage, dependence on tourism, tourism overflow and harm to local resources, among other things. This then needs to be managed, which costs the region money, as tourism is not only an income but is also an expense as it costs to keep a sustainable tourist flow.

Managing costs is not the only price that tourism brings, with other expenses being for example infrastructure, marketing, governmental costs, restorations, and tourist planning.

These expenses are usually made to increase the possible flow of tourism, to create a better tourist experience and to even out the negative effects of tourism.

To summarise, tourism can have both negative and positive effects on the economy, depending on how it is handled and managed, and its effects can be beneficial on various levels. Tourism is an important industry as it helps generate money and affects nearly every sector in the economy, due to the secondary effects that are created.

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3 Finland

Finland is a country in northern Europe that attracts tourists mostly interested in culture, entertainment, shopping and nature. Finland had in 2018 a population of 5,5 million people widely spread over its area of 338,440 km2 of land. Finland has been a part of the European Union since 1995 and uses the currency euro. ( Finland Promotion Board, 2020)

3.1 Tourism in Finland

Tourism is a hard industry to compete in and the competition globally has been increasing.

It is believed that Finland has not reached its peak in tourist growth and future growth is expected. Tourism in Finland has been growing annually and is becoming an increasingly important factor in the Finnish economy. Tourism stands for 2.7% of the Finnish GDP and it is estimated that tourism will stand for 3% of the Finnish GDP by 2025. (Visit Finland, 2019a)

The annual increase in tourism is thanks to long-term strategies, companies working in the tourist industry, and also more recently thanks to global sales promotion and systematic marketing on the target markets (Visit Finland, 2019a). The future focus for Finland regarding tourism is to turn interest into demand, increase growth from international markets, cooperation and a heavy focus on sustainability, while increasing the flow of tourists.

The tourism industry in Finland is a beneficial industry that directly and indirectly impacts other industries and companies. Tourism has a great impact on for example the construction, transport, and commerce sectors in Finland. Tourism export earnings account for 5,4% of the entire export earnings in Finland. The growth of tourist export is the most rapid export service in Finland and has the second-biggest share in total export services.

This means that the tourism sector is equal in size to the agricultural and forest industry.

(Visit Finland, 2019a)

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3.2 Target markets

Tourism can be split up into two major groups, domestic and inbound tourism. Both categories are important to the Finnish economy. Inbound tourism is mostly tourists from Europe, as tourists from the European Union stand for 44% of all the inbound trips, while Asian tourists represent 12% of the inbound trips (Visit Finland, 2019b). Marketing for inbound tourism is therefore mainly focused on European and Asian countries that have a steady tourism growth and, to a lesser extent, on the United States (Business Finland, 2019). Marketing for domestic tourism is actively promoted in the whole country, as domestic tourism is bigger than inbound tourism in Finland (Visit Finland, 2019b).

3.3 Tourist regions

The diversity in the Finnish country is what attracts tourists and differentiates Finland from other countries. The wide variety is seen in different parts of Finland, the east, the west, the north and southern Finland, each offering different things. Finland can be divided into four major regions regarding tourism which are: The Capital region, the coastal and the archipelago region, the lake district and Lapland.

The capital region attracts the most tourists and held 2 902 000 nights spent by tourists in 2018. Lapland is also annually a high region for tourists and provided 1 719 000 nights for tourists. The Costal and the Archipelago region held 1 031 000 nights and the lake district held 1 176 000 nights for tourists in 2018. Both the capital region and Lapland experienced an increase in night stays that year, while the two other regions experienced a decline.

(Business Finland, 2019)

3.4 Tourist growth and consumption

Tourism growth requires long-term strategies and planning, to annually succeed. Finland has long-term plans and strategies in motion to increase sustainable tourism growth.

Tourist consumption in Finland has in recent years grown and increased even further in

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2018, generating €15.7 billion out of which €4.9 billion was generated in export earnings from inbound tourism. The amount generated by tourism export earnings has doubled since the year 2000. Tourism also affects the Finnish GPD and accounted for 2.7% of the GDP in 2018. (Visit Finland, 2019a)

3.4.1 Growth

The number of trips made per year has annually been growing throughout the years and between the years 2011 to 2017, the total demand for tourism has grown from €13.7 billion to €15 billion. The total demand for tourism has decreased and increased for years but grew noticeable in 2017, due to a strong increase in inbound tourism. Domestic demand has annually been increasing from 2011 to 2017 and the demand for domestic tourism was

€10,4 billion in 2017 (figure 1). Inbound tourism demand has experienced a decrease during this period, but the demand grew in 2017 to €4,6 billion. Tourism has during this period remained around 2.6% of the Finnish GDP. (Visit Finland, 2019b)

Figure 1: Tourist demand 2011-2017 0

2 4 6 8 10 12 14 16

2011 2012 2013 2014 2015 2016 2017

Tourism demand, in billion EUR

Total Tourism demand Inbound tourism demand Domestic tourism demand

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3.5 Inbound tourism

The income from international tourist spendings has increased with the increased number of inbound tourism arrivals. There was a +3% increase in trips to Finland in 2018 compared to the previous year, resulting in about 8.5 million trips that were made by international visitors. However, only 2.9 million of those trips were leisure trips. The leisure trips increased by +4% from the previous year and there was also an increase in the percentage of overnight stays in Finland, while the percentage of day trips from inbound tourists had decreased. (Business Finland, 2018)

3.5.1 Tourism by country

When looking at tourists that travel to Finland, a large part comes from the neighboring countries, especially Russia. Russia stands for over one-third of all the trips made to Finland.

Sweden and Estonia account also for a considerable number of trips, although the number of tourists from those countries declined in 2018. Other countries that performed a high number of trips to Finland were Germany, the United Kingdom, Spain, China and other European and Asian countries. (Business Finland, 2018)

3.5.2 Spending per visit from inbound tourists

The average sum spent per visit generally varies from what country the traveller is from, the length of the stay and the purpose of the trip. The average sum spent per trip in Finland in 2018 was 358€, this sum includes advance costs but excludes inbound and outbound travel expenses from/to Finland. The amount spent in Finland by foreign tourists in 2018 was €3.1 billion, which is an increase of +1% from 2017. The 1% growth in spending equals about €40 million more than in 2017. (Business Finland, 2018)

The average amount spent per trip from some countries is significantly higher than the average number of 358€. The countries with the highest spending per visit in 2018 were China, the USA, Australia, South Korea, France, Spain, and Switzerland. (Business Finland, 2018)

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3.5.3 Spending per country

The tourists that brought in the most money in total during 2018 were from Russia, China, Germany, Sweden, the United Kingdom, the United States, Spain and other EU and Asian countries (shown in figure 2). Russian and Chinese tourists are the largest contributors, Russian tourists brought in a total of €650 million, while Chinese tourists brought in a total of €413 million. Both the Russian and the Chinese numbers of trips to Finland decreased in 2018, but they are still the two top countries that bring in the most money. (Business Finland, 2018)

Figure 2: Spending’s in Finland in 2016-2018. Africa and "the Rest of Oceania" should be considered inactive because of the small number of visitors (Business Finland, 2018)

Chinese tourists take significantly fewer trips to Finland compared to Russian tourists, Chinese tourists have however a higher total spending due to the high amount of money they usually spend per visit.

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Chinese tourists tend to spend an average of €910 per trip to Finland, while Russian tourists spend just under €200 per trip on average. Instead, however, the Russian tourists have a much higher number of performed trips and make up for about 35% of all trips performed to Finland. Russian tourists perform a lot more day trips in comparison to Chinese tourists.

It is estimated that over 50% of the trips performed by Russians were day trips in 2018, while Chinese tourists tend to stay for a longer time. (Business Finland, 2018)

The number of trips performed from the USA and Latin America has increased significantly since 2017 and those countries are becoming higher income sources with a higher spending number per visit. Meanwhile, Finland's neighboring countries Sweden and Estonia have had a decrease in tourist spending. Many countries have overall increased their spending in Finland during 2018 and the years before that. (Business Finland, 2018)

3.6 Spending categories

The money spent by tourists in Finland can be divided into different categories to get a better understanding of where we collect the most money from our tourists. Many categories such as accommodation and restaurants experienced an increase in 2018, which can be seen in figure 3.

Accommodation grew by €70 million to a total of €531 million and the category restaurants and cafes grew by €64 million to a total of €445 million spent. There was however a decline in the shopping and food category, which declined with €130 million, leaving the final sum spent in this category around €911 million in 2018. Despite this decrease, the shopping and food category is still the biggest income category. (Business Finland, 2018)

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Figure 3: Spending categories in Finland 2016-2018 (Business Finland, 2019)

3.7 Employment in tourism

The tourist industry is an important sector for the labor and export market. There has been an increase in employment since 2011 in the tourism industry, except in 2014 and 2015, where there was a decline in employment. The biggest growth in employment during the time span of 2011 to 2017 was in the year 2011 when the employment number grew with 6 100 employees in the tourism sector. However, the employment experienced again a small decline in the employment sector in 2018, when the employment declined by 100 people to a total of 142 100 employees in Finland, seen in figure 4. (Visit Finland, 2019a)

Figure 4: Employment in the tourism industries, in thousands

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The tourism industry provides jobs throughout Finland, but most jobs are in the Capital Region (Uusimaa), Southwest Finland, Lapland, and North Ostrobothnia. Tourism accounted for about 5.2% of all Finland’s employees in 2011 and has increased in 2018 to 5,5% of all employees. The tourist industry is becoming an increasingly important provider of jobs in Finland and is already in need of more employees to sustain further growth of tourism. (Visit Finland, 2019b)

The employees in the tourist industry are largely located in bars and restaurants, which account for 50% of the jobs, while accommodation services provide 11% of the jobs (figure 5). The tourism industry also directly employs people in the transport, cultural, sport and entertainment sectors. (Visit Finland, 2019a)

Figure 5: Employment by industry in Finland 2018

4 Spain

Spain is a popular tourist destination that attracts many tourists with the warm climate, beaches, food, and culture. Spain has a population of 46,9 million people on a surface of 498 504 km². Spain is located in the south of Europe and is a part of the European Union and uses the currency euro. (European Commission, 2019)

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4.1 Tourism in Spain

Money generated by tourism is an important income in the Spanish economy and is one of the reasons for Spain's economic recovery after the 2008 financial crisis. Spain's tourism industry has since the crisis grown and today Spain is one of the most visited countries in the world. Spain has long been a favorite destination among tourists and managed to attract 82.8 million tourists in 2018. (Salvatierra, 2019)

The tourist sector represented 12,3% of Spain’s GDP in 2018. Tourism has annually increased its representing share of the Spanish GDP which has increased by 1,3% since 2015. Money generated by the tourist industry amounted to a total of around €149 billion in 2018 (Instituto Nacional de Estadística, 2019). International tourists brought in €89,8 billion of the €148 billion, representing about 60% of the income. (Instituto de Turismo de España, 2019)

Figure 6: Percentual contribution of tourism to employment and GDP 2015-2018 (Instituto Nacional de Estadística, 2019)

Spain strives to continue to grow and develop its tourism sector with a sustainable strategy for the long term. The strategy of sustainable tourism of Spain 2030, is focusing on territorial, socio-economic and environmental sustainability. This way, Spain plans to keep sustainability and growth, while continuing to be one of the most popular tourist

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destinations worldwide. The new plan also puts focus on more outspread destinations and better equality of distribution regarding the burdens and benefits of tourism, which is

currently becoming a problem in Spain. (Ministerio de Industria, Comercio Y Turismo, n.d.)

4.2 Target markets

Spain has a large number of inbound tourists from all around the world coming to visit Spain, the largest group however are Europeans. Spain is the most competitive country in tourism and one of the most visited tourist destinations in the world in 2018 (Calderwood

& Soshkin, 2019). Spain has great online marketing, innovative campaigns and international advertising focusing on Europe and Asia markets but also on the Arab, Turkish and Hebrew markets. (Misisterio de Industria, Comercio y Turismo, u.d.)

4.3 Tourist regions

Spain has many different destinations to offer tourists, but some areas are more popular among tourists than others. Tourists are highly attracted to the region of Catalonia and the region attracted 19 million inbound tourists in 2019, making it the most visited region of Spain, seen in figure 7. (Instituto de Turismo de España, 2019)

Other popular tourist destinations are located by the ocean and are destinations like the Balearic Islands, the Canarian Islands and Valencia. These are all top destinations when it comes to attracting international tourists, as many come to Spain for the sun and the beaches. The capital Madrid also attracts tourists but is not as popular as the other destinations located by the ocean. (Instituto de Turismo de España, 2019)

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Figure 7: International tourist arrivals, per destination (Instituto de Turismo de España, 2019)

4.4 Tourist growth and consumption

Spain has great tourist strategies, marketing and tourist platforms which help attract tourists annually. International arrivals have increased each year and increased by +1.1%

to 82,8 million arrivals in 2018. This is however a lower increase in percentage than usual.

The percentage of annual tourist arrivals have been a lot higher the previous years and can be for example compared with the growth in 2017, where the increase was +8.7%, seen in figure 8. (Instituto de Turismo de España, 2019)

Figure 8: International tourist arrivals in Spain 2012-2018 (Instituto de Turismo de España, 2019)

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4.4.1 Growth

As the annual number of tourists has grown, so has the annual income from tourism.

Tourist spending’s reached €89.8 billion in 2018, which is an increase of 3.3% from the previous year (figure 9). Tourist consumption has grown from €56.8 billion in 2012 to €89.8 billion in 2018 (Instituto de Turismo de España, 2019). The lower percentage increase in tourist arrivals also affected the tourist spending, which percentage-wise, also grew noticeably less than the previous years.

Figure 9: Tourist consumption in Spain, in millions (Instituto de Turismo de España, 2019)

4.5 Inbound tourism

Spain attracts tourists from all over the world, as it is the most competitive country in tourism (Calderwood & Soshkin, 2019). But the two major sources of inbound tourism in Spain are from the United Kingdom and Germany. Both the number of tourist arrivals from Germany and the United Kingdom declined in 2018, resulting in about 11.4 million German tourists and 18.5 million British tourists visiting Spain. The German tourists declined by - 4.1% while British tourists declined by -1.6%, both countries are still however the top contributors to inbound tourism. (Salvatierra, 2019)

Tourists from the Scandinavian countries are also one of Spain's most important tourist sources. The number of Scandinavian tourist arrivals did also decline in 2018, by -0.7%, to a number of 5.7 million. Even though there was a decline in tourists from all three major

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countries, Spain's total number of inbound tourists grew in 2018. The growth happened in many other countries that currently take up a smaller percentage of the total amount of arrivals. Growth of tourism was seen for example in the number of tourist arrivals from the United States (+11.8%) and Russia (+6.3%). (Salvatierra, 2019)

4.5.1 Spending’s by country

Inbound tourism is a major contributor to the Spanish economy and tourists spent €89.8 billion in 2018. The money is generated from tourists all over the world, but tourists from the United Kingdom are the top spenders and stand for 20% of the total amount that inbound tourists spent in Spain in 2018. The high income from tourists from the United Kingdom is strongly linked to the high dominating number of tourists visiting from the country. (Instituto de Turismo de España, 2019)

German tourists are the second-highest spenders when considering the total generated amount and stand for 12.7% of inbound tourist spending's in Spain. Tourists from France take up about 8.2% of the total amount, followed up by tourists from the Nordic countries who take up a smaller share of visitors but are some of the highest spenders per visit.

(Instituto de Turismo de España, 2019)

4.5.2 Spending per visit from inbound tourists

As the total amount of money spent in Spain has grown, so has the daily average spending by tourists. The average amount of money spent per day grew +7.4% in 2018 and it is estimated that the average sum spent by tourists daily was 146€ per day. The average stay was 7.4 days, resulting in a total average spending of about 1080€ per tourist. (Salvatierra, 2019)

4.6 Spending targets

Tourist spendings in Spain can also be split into different categories to easier understand which sectors bring the most money. Tourists tend to spend the most money on transport,

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tourist packages and different activities in Spain, seen in figure 10. The amount of money spent on these categories has grown, except the category of tourist packages. These three spending categories are important income sources, for which tourists are willing to pay to get a better experience.

Spain has a wide range of activities to offer their tourists thanks to the warm climate, natural diversity and history. Spain offers a wide range of nature experiences, water experiences, sports packages, architecture, museums, great food and wine tasting. About 29.2% of all the tourists who arrived in 2019 purchased a tourist package, the majority of which were purchased once the tourist arrived in Spain. (Instituto de Turismo de España, 2019)

Figure 10: Spending categories in Spain, 2019 (Instituto de Turismo de España, 2019)

4.7 Employment of tourism

Tourism is an important sector for the Spanish economy and the employment industry. The increase of inbound tourism has led to an annual increased demand in the labor sector, presented in figure 11.

The tourist sector provided 2.62 million jobs in 2018, which is 12,7% of the total employment in Spain (Instituto Nacional de Estadística, 2019). This means that the tourist sector has become the biggest employment sector in Spain, followed by the construction sector (Javier & Gómez, 2018).

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Figure 11: Employment in the tourist industry (OECDilibrary, u.d.)

The tourist industry keeps a high number of workers employed but the downside of the Spanish tourism industry is that 35.2% of all the tourist employment contracts are temporary, usually from April to May, due to the seasonal climate that mainly attracts the tourists. This seasonal tourism results in a big drop in employment from summer to winter and is clearly visible in statistics. (Javier & Gómez, 2018)

5 Comparison of tourism

Tourism is important in both Finland and Spain, but the type of tourism itself is very different in the two countries. Tourism in Spain has a much more important and vital part of Spain's economy than it does in Finland. Spain was the most competitive country in the travel and tourism sector in 2019 for the third time in a row, while Finland was the 28:th most competitive (Calderwood & Soshkin, 2019).

2000000 2100000 2200000 2300000 2400000 2500000 2600000 2700000

2014 2015 2016 2017 2018

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5.1 Economic comparison

Tourism accounted for 2.7% of Finland’s GDP, while tourism accounted for 12,3% of Spain’s GDP in 2018. Finland had the same year a GDP of €233 662 million (Statistics Finland, 2020).

While Spain had a GPD of €1,202,193 million (Instituto Nacional de Estadística, n.d.). Both countries expect tourism to obtain a bigger part of the GDP in the future, as it is still possible for both countries to expand their tourist industry in different ways.

Spain attracts a lot more tourists than Finland and attracted 82.8 million visitors while Finland attracted 8.5 million in 2018. The generated amount of money by tourism in 2018 in Finland was €15.7 billion compared to €148 billion in Spain, out of which tourist spending amounted to €89.8 billion in Spain and €3.1 billion in Finland.

5.2 Comparison of tourism and tourist flow

A difference in tourism is that Spain has a higher seasonal tourist flow than Finland. This means that there is a higher income and workforce during the high tourist seasons but a big drop during the low seasons in Spain, while Finland has a more aligned seasonal tourist flow. The areas which generate tourist income are also divided and balanced differently in the two countries. Finland has a rather even spread of tourism throughout the country, with a small peak in the capital and Lapland. Spain has however a couple of hotspots that attract most of the tourists, which are mainly Catalonia and different beach and ocean areas. This affects the regional economy, making some areas within the country notably richer than the others. The regional economic impact of tourism is less discernible in Finland, as tourism is more equally spread both geographically and seasonally.

The spending behavior in tourism is also different between the countries as the purpose of the trip and the average length per stay differences in the countries. Tourists that come to Finland tend to spend a shorter amount of time and less money on average, than what tourists do in Spain. The average spending per trip in Finland is 358€, while it is 1080€ in Spain. Tourists in Spain have in general a longer stay and because of that also a higher spending per visit, tourists in Spain also tend to spend more on different activities. This means that the spending categories contrast between the countries. Spain's main tourist

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spending categories are various activities, tourist packages and transport. While Finland's most popular spending categories are more essential categories like food, shopping, and accommodation.

5.3 Comparison in employment

Tourism is an important part of the labor sector and provided 12,7% of all jobs in Spain, while tourism in Finland provided 5,5% of all jobs in 2018. Spain has a much larger number of inhabitants and a higher number of tourists, resulting in 2.62 million jobs provided in the tourist sector in Spain. Meanwhile, the tourist sector in Finland provided 142 100 jobs.

Employment from tourism is a vital part of the Spanish labor market and it is gaining significance in the Finnish employment sector. However, Spain faces challenges with fluctuating employment due to the seasonal nature of their tourism, which is much less notable in Finland.

6 Interview based research

There are multiple ways to collect research and the execution method of the collection can vary depending on what the study is aimed at and the purpose of the research. Research can be done through quantitative or qualitative research or a combination of both.

Quantitative research focuses on the number of respondents and the interest lies in analyzing numbers from the collected data. Qualitative research focuses on the behavior, attitude and the things said, over the number of participants. The difference in the research methods are how they are collected, the point of view from theoretical to practical, and how the material is handled and interpreted. Another difference is that qualitative research focuses on the things being said while quantitative research focuses on a bigger number of participates and is data-centered. (Bryman & Bell, 2017)

To get a better view of the importance of tourism for the economy, a qualitative research was done in form of interviews. Quantitative research was chosen as the interview is focused on the practical impact instead of numbers and data. Interview requests were sent

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to multiple tourist-related companies in the region of Vaasa and two companies accepted the request. The companies that agreed to an interview were Vaasan seudun Matkailu Oy, better known as Visit Vaasa, and the company Nlc Ferry Ab Oy, also known as Wasaline.

The impact of the virus Covid-19 has caused a big halt to the business world in many ways, especially in the tourist industry. The purpose of the interviews was to get a company- based view of how the virus Covid-19 has affected the economy in a certain region to provide a more in-depth view of the importance of tourism.

The interviews collected in the research are presented in the following subchapters separately, to better present how each company has been affected by the pandemic. The companies were contacted by email with a request to be interviewed and meetings were then scheduled. The interview with Wasaline was done over the phone and the interview with Visit Vaasa was performed through a Microsoft Teams meeting.

6.1 Interview with Wasaline

The first interview collected was with Peter Ståhlberg, the CEO of Wasaline, which is the company operating the ferry line in between Finland and Sweden with the route of Vaasa- Umeå and vice versa. Wasaline has, like many other companies been severely impacted by the virus. As they are a passenger transport company with passenger traffic as one of their main incomes, the company has seen a strong decline in their revenue as travel has been drastically reduced.

Ståhlberg explains that the company has experienced a decrease of passengers with minus 75% and is currently only servicing commercial traffic on their routes, as traveling is limited due to the virus. As the passenger number has dropped, so has the revenue in the company.

Passenger revenue, which is the main income for Wasaline, has dropped by 70% due to the virus, while the total revenue has decreased by about 85%. However, Wasaline has experienced an increase in freight loads, thanks to strong partner loyalty and an increase in online shopping, which has helped the company. (Interview with Peter Ståhlberg 2021) Wasaline has due to the virus been forced to take action and minimize costs to manage the situation. The company has for example temporarily closed alcohol servings, reduced

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orders from subcontractors and laid off employees, among other internal changes to handle the crisis. The company has laid off about 60% of its total workforce, which has led to some people resigning completely and finding new work. This means that the company will be forced to start recruiting and schooling new employees when travel starts retaking its previous form. Ståhlberg points out that when travel resumes, new training will be necessary anyway since Wasaline will then re-enter the market with a new cruise ship and a whole new strategy. Travel will also not be the same as before the virus, so training will therefore be necessary either way. (Interview with Peter Ståhlberg 2021)

The new need to constantly update and inform people of the effects and restrictions of the virus has created many extra costs for the company. This has further created an extra work burden for the people who have not been laid off, according to Ståhlberg. (Interview with Peter Ståhlberg 2021)

However, not all effects have been negative as Wasaline took the opportunity to focus on improving many facets in the company in the early stages of the pandemic, as there was a smaller number of passengers in focus. Wasaline has for example worked on furthering its digitalization processes, optimizing its booking system and other improvements to help the company grow back after the crisis (Interview with Peter Ståhlberg 2021). Focus on sustainable tourism and circular economy have also been in focus points, as customers are getting increasingly aware of the effects of traveling, making sustainable travel an important component for the future. The positive effect of being able to focus on investing in the company by improving internally has however worn off, as the sanitary crisis has been going on for an extended time, pushing the company to focus on survival. (Interview with Peter Ståhlberg 2021)

During the interview, Ståhlberg also highlights the importance of customer and partner loyalty in times like these. Everybody has been economically struck, but having loyal partners has helped the company be more stable (Interview with Peter Ståhlberg 2021).

Tourist companies are not the only ones who have been hardly struck by the pandemic as the virus has affected the entire economy. It has brought on difficulties for companies in other areas due to restrictions and a change in demand, both in business-to-customer relationships and in business-to-business relationships.

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The negative change in demand does not only makes the direct seller suffer but along with it all of its subcontractors, due to the chain effect of fewer goods and services needed to be produced and delivered. This can cause companies to change procedures or behavior, making it more difficult to re-sign or create contracts. This can cause price wars and loss of customers in the business-to-business world. Having loyal partners is important, especially during economically challenging times. Maintaining business-to-customer loyalty is in comparison to business-to-business relationships, much easier to maintain as in the latter the sales are often made in bulk and contracts, meaning that much bigger sums are in play.

A loss of a partnership can have huge consequences for a company, such as lowered value or prices being jeopardized. The extra cost and time of finding new partners in the competitive business-to-business market is an extra difficulty for companies as well.

The reduced amount of travelers with Wasaline has not only affected Wasaline and its subcontractors but many other companies as well. Wasaline is an important player in the transport of tourists for the region of Vaasa and the company constantly brings in tourists to the region, who then also helps the region's overall consumption and economy.

6.2 Interview with Visit Vaasa

The second interview was collected with the CEO of Visit Vaasa, Max Jansson. Visit Vaasa is a municipally-owned company and is a subsidiary company of Vaasa City, which owns 54% of Visit Vaasa. The main mission of Visit Vaasa is to sell the city and region of Vaasa as a tourist destination, with other domains of focus being marketing the city and region, attracting events and conventions and shopping in Vaasa.

The work within Visit Vaasa has changed a lot in the year 2020 and the company has been forced to think in new ways to adapt to the pandemic. The region of Vaasa started the summer of 2020 very well and was looking at what could have been one of the best summers in 20 years until the virus hit the region, according to Jansson (Interview with Max Jansson 2021).

Visit Vaasa, which normally helps organize around 550 different events in Vaasa each year, started experiencing its first signs of the virus in March 2020. One of the most important

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events of the spring was the first event to get canceled due to the virus. Visit Vaasa then started receiving notice of other companies postponing events that eventually also got canceled. The effect of the virus started showing and the company that previously had a revenue of about one million, lost about a quarter-million in 2020 due to the virus, as most events were canceled. The changes caused by the virus forced the company to temporarily lay off employees and even letting some go indefinitely, resulting in a two-and-a-half- month period where the CEO was working solo, instead of with the usual team of 8 full- time employees. (Interview with Max Jansson 2021)

Visit Vaasa has had to rethink many aspects of the company as travel has changed. The company used for example to make many brochures in the previous years but has decided not to make the brochures for 2021, due to the travel restrictions and changes in travel.

The company will instead focus on online visibility, which they have been working on in previous years as well. In 2019, the company finished their new customer website, which was later chosen Finland’s best website, awarded by the Finnish Web awards. The website has attracted many customers and there were almost 1 million unique clicks on the website link and almost 5 million links through paid campaigns in 2020. Visit Vaasa has during the year of the pandemic focused on digital campaigns, as it is the easiest way to reach potential customers during the pandemic. (Interview with Max Jansson 2021)

Visit Vaasa provides a variety of different campaigns with different themes for traveling and they have managed to sell somewhat well despite the pandemic. The company has created new themes, that fit the pandemic and focus on future travel after the pandemic.

The new themes center around the feeling travel provides, where the focus lies on getting the buyer to dream of traveling, creating a future need, making the customers ready to buy when the pandemic is over and it is safe to travel. Heavy focus is also on social media campaigns and a variety of paid campaigns, to create a future purchase. (Interview with Max Jansson 2021)

Jansson, who usually travels to sell Vaasa as a destination to different tour operators, mentions how the way he works has changed due to travel restrictions and how difficult it is to work in this situation as he helps and works with many companies that are also struggling or on the verge of going under.

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Customers will be forced to re-think when traveling resumes as many travel companies have been forced to shut down during the pandemic. With fewer tour operators after the pandemic but rising customer demand, it is expected that tourists will be met with higher prices. Visit Vaasa works with a range of different tour operators and currently has about 14-15 different travel packages placed out, where Vaasa is a part-destination of that trip.

Germans are some of the tourists that tend to want to buy tourist packages when visiting Vaasa. Vaasa has about 70% domestic tourism and about 30% international tourism, where Swedes and tourists from German-speaking countries are the main international visitors for Vaasa. (Interview with Max Jansson 2021)

In the interview, Jansson notes that the region of Vaasa has done well in 2020 considering the pandemic start and that Vaasa even saw an increase in domestic tourism. Despite the pandemic, Finnish domestic tourism increased by +4,3% in the summer of 2020 in the measures of domestic overnight stays. Vaasa saw an increase in domestic overnight stays with +24,2% as it was not as badly hit as other areas in Finland, like for example the capital region, which experienced a decline of 47% in domestic overnight stay, as it was the center of the pandemic in Finland in 2020. However, the pandemic took a stronger turn on Vaasa in August 2020, decreasing the overnight stays in the city, leaving Vaasa with a significantly lower percentage of overnight stays at the beginning of 2021 compared to previous years.

The hotel occupancy of Vaasa, which is normally at 80-90%, was instead at a percentage of 18%, which shows a clear decline in people visiting the region of Vaasa. (Interview with Max Jansson 2021)

Tourism can benefit a region but it can also be a disadvantage in certain circumstances, like for example during a pandemic. Vaasa takes the benefit of being a smaller city that is not dependant on tourism, nor overflown by it. Tourism only stands for a small percentage of Vaasa's GPD, meaning that the city is not very dependent on tourism, but tourism still generates good money for the region. Jansson states in the interview that becoming a mass tourist destination is not something Visit Vaasa aims to achieve nor wants to achieve, as they want to focus on being only a part of a bigger trip, giving the traveler the chance to see more while focusing on sustainable tourism.

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6.3 Conclusion of interviews:

Like many other companies affected by the pandemic, both the companies interviewed have been forced to take measures to survive the pandemic. Both companies have been forced to minimize cost by for example laying off employees. As the revenue has dropped in connection with the decline of customers, an economic chain effect was set into motion that also forced companies in other areas to adjust operations during the pandemic.

Despite the limited number of companies that agreed to be part of this paper, the effect of the pandemic is evident and its ensuing decline of tourism has affected many areas.

Production, consumption, and employment are a few of the areas affected and with their limited returns, have also contributed to the reduced amount of money generated in the Vaasa region. Since there are fewer tourists than usual, there is also a smaller demand for everyday necessities, thus reducing production in other sectors such as food, accommodation, transport, shopping among other things. All this adds up to a bigger financial loss than just the direct decrease of money generated by tourism.

Tourism previously stood for about 2.7% of the Finnish economy, bringing in valuable money and other contributions to the country that now have declined, as the tourist industry is one of the most affected branches by the virus. Tourism is not the only reason why the Finnish economy has suffered under the Covid-19 crisis, as the pandemic has prevented non-tourism related companies from functioning normally, people from working, and forced normal day-to-day activities to adapt to the different way of living.

7 Summary

The thesis’ purpose was to give a better understanding of why tourism is important and to show its various effects on a particular country’s economy. This was done by doing research and studying various sources on the topic of tourism in Finland and Spain and by doing a comparison of these two countries, as well as taking a closer look at two companies and how they handled the Covid-19 pandemic.

The thesis is built around the country profile that shows the statistic importance and growth of tourism, a big part of the thesis is therefore focused on these profiles. The

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country profiles also include more specific information on tourism, to understand where the money is generated and by whom. The structure of the economic effect tourism has is the same in different countries but affects the countries in different ways, both negatively and positively. Spain, which is one of the top destinations for tourists worldwide, collects great benefits and income from its many tourists. Tourism also stands for a big part of the country's GDP, making Spain more dependent on the industry. Tourism's large contribution to a country's GDP has both negative and positive consequences, but will during a pandemic bring more difficulties for an economy that relies more on tourism. Finland on the other hand has less tourism and is less competitive when it comes to tourism. A significantly smaller part of the Finnish GDP comes from tourism, meaning that Finland will not directly suffer as much during a time with severely limited travel.

There are always negative and positive sides to having one particular industry play an important role in a country's GDP. With limited travel and many tourist attractions closed, an economy dependent on tourists such as Spain's has suffered greatly from the decreased income usually generated by the industry. Both countries benefit greatly from tourism but it is clear that Spain is a leading country in tourism and that tourism brings in a lot more economically to the country than Finland. Spain also faces more of the negative side-effects of tourism, like mass tourism in certain areas and bigger fluctuation in employment over the course of the year as this is not seen as distinctly in Finland. The Nordic country does have significantly less tourism and thus also generates less money, both in the total aspect and in the average sum spent per trip.

Developments could be made in both countries, with both of them already working on increasing revenue more sustainably. Spain does this by trying to distribute tourists more evenly across the country and promoting places that are not usually tourist hot spots. This will contribute to a better living standard in those regions and alleviate some of the disadvantages while still benefiting the local economy. Finland's strategy focuses on raising the average sum spent per trip and increasing the number of tourists, all while making sure not to create an overflow that could harm local communities.

While the country analyses give an impression of the tourism's economic impact on a country level, the research of the companies on a regional level seeks to provide a selective look at the economic impact of the pandemic on the tourist industry in the Vaasa region.

Tourism contributes more to the economy than just the purchases made in the direct

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tourist industry as it also helps many other underlying factors such as employment, infrastructure, construction, production, consumption and various improvements in local communities due to the chain effects, making tourism also affect other companies and industriesindirectly.

8 Critical review and discussion

The research for this thesis was mostly directly collected from governmental websites and databases, to provide information from a reliable source directly from the producers. The governmental websites provided useful documents for the thesis as they often gave out detailed information, statistics and data. However, a better variation of the use of sources could have been utilized and some of the used references in the Spanish country analysis could have been from a more scientific and academic source. It was fairly easy to get access to most of the information as governments published detailed information about tourism.

It was however challenging to collect information on Spain due to language barriers. The Spanish governmental websites offered a limited number of documents in English which resulted in translations of the Spanish documents to access more information. The language barriers should have been realized earlier as Spanish is the official language of Spain and my knowledge of Spanish is limited, which affected the material that could have been accessed and used in this thesis.

The purpose of the thesis was to provide a better understanding of the economic impact tourism has, which has been presented through the country comparison and the company interviews. The work discussed the effects of tourism on an economic level in different ways and views. However, the work could have been more extensive and detailed on the practical effects in certain parts and explained further the economic structure and effect of tourism, especially in the country analyses. The information and statistics provided for the countries could have been better backed up with further explanations of the impact, but at risk of repetition, the country analysis was kept on a statistical point while the regional research provided deeper information, which the reader then can draw parallels to, to understand the bigger picture.

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The repercussions of the virus Covid-19 will likely continue to impact companies in the future as it is an ongoing pandemic, meaning that companies will still struggle and undertake new actions to survive. Many companies will still be affected or go bankrupt during this pandemic or even after it has passed, meaning that the tourist industry will change when traveling resumes and the economic impact will differ, as tourism will not be the same as before the pandemic. The interviews collected in this work consisted of only two companies and the thesis could have presented a wider aspect if more interviews had been collected, even if many companies have taken similar actions to survive the pandemic.

The answers in the interviews also only present the effect during 2020 and the beginning of 2021, meaning that the full effect the virus will have on the companies is still unknown as the pandemic is still ongoing and continuously affecting companies and the economy.

In conclusion, the thesis presented the purpose of the work and offered a better view of the economic impact of tourism. However, the work could have been more comprehensive in certain chapters. A view of what tourism's economic impact is on a national, regional and company level was presented and described both statistically and practically. The negative effects of tourism were also included briefly to provide a more nuanced understanding since tourism is not only an income but also an expense.

A comparative study on the impact of tourism in Finland and Spain: Economic key aspects of tourism