The total economic impact of the visitor economy is the sum by adding the direct, indirect and induced effect.

Direct effects are the changes in economic activity that will affect the expenditure of tourism immediately. For example, if the number of tourists that stayed overnight in the hotel increases suddenly, it increases the yield in sales for the hotel sector directly.

Indirect effects are the changes from sale, employment or income that happen within the backward-linked industries (industry that supply product and services to hotel). For example, an increase percentage of sales for the linen supplier resulting from more hotel sales are an indirect effect of guest spending. And, businesses that supply products and services to linen suppliers will represent another round of indirect effects. Eventually, it will link hotels to many other economic sectors in that region.

Induced effects are the changes that happen in economic activity resulting from household spending of income that are earned directly or indirectly as a result of tourism spending. For example, hotel and linen supply employees supported directly or indirectly by tourism spend their income in transportation, food, housing, household product and service needs in that region. The income, sales and job that resulted from household spending of wages or proprietor’s income are induced effects.

Simple, right? Click on the button below to view a visual of this economic impact means for Utah.