Stability of the Jobs to Sales Ratio by Capacity
Utilization in the Input-Output Model
Ya-Yen Sun
Assistant Professor
Department of Kinesiology, Health, and Leisure Studies (DKHL)
National University of Kaohsiung, Taiwan
September 3, 2007
Presentation for the Advances in Forest and Natural Resource Management Symposium
Input-Output (I-O) Analysis in
Recreation & Tourism
Estimate economic changes resulting from spending
associated with recreation/ tourism activities
Total economic impacts
= demand changes * multipliers * economic ratios = Ê(I-A)
-1Y
Total jobs = spending * sales multipliers * jobs to sales ratio
Assumptions
constant multipliers and economic ratios
Factors that influence the stability of
multipliers and economic ratios
technological changes
price changes
returns to scale
trade patterns
(Rose & Miernyk, 1989; West, 1995).
capacity utilization (CU)
“the ratio of actual used
(consumed) products to the
total available products”
(Nelson, 1989)
¾
Lodging
¾
Transportation
¾Entertainment
¾
Food and beverage
Purposes of this study
Study subject: Taiwan Tourist Hotel
1.
Jobs to sales ratio:
Empirically test the stability of the jobs to sales ratio in relation
to capacity utilization (occupancy rates)
2.
Direct job estimation
Compare job estimates (direct effect) based on the standard I-O
analysis and predicted job ratio by occupancy rates
Data
Panel data:
Monthly Taiwan tourist hotels operational data from
1999 to 2005 (84 data points)
Analytical framework
P
1
*
X
J
price
1
*
efficiency
labor
price
room
1
*
rooms
occupied
jobs
sales
jobs
(JR)
ratio
sales
to
jobs
The
=
=
=
=
T
X
capacity
total
rooms
occupied
(OR)
rate
Occupancy
=
=
OR = occupancy rate JR = jobs to sales ratio J: jobs X: occupied rooms P: room price T: hotel capacity)
(
OR
1
*
T
*
P
J
JR
=
=
f
OR
Analytical framework
Because
lnJR = lnJ – lnP – lnT – lnOR
Hypothesis 1: ln (jobs to sales ratio) = f [ln(occupancy rate)]
Hypothesis 2: ln (jobs) = f [ln(occupancy rate)]
Hypothesis 3: ln (room price) = f [ln(occupancy rate)]
Hypothesis 4: ln (hotel capacity) = f [ln(occupancy rate)]
Analytical framework
I: Standard I-O analysis
Direct jobs = sales at t
2* jobs to sales ratio at t
1= Number of units sold at t
2* price ratio between t
1& t
2* labor efficiency at t
1II: Our approach for the estimation of jobs
Direct jobs
= Number of units (services) sold at t
2* labor efficiency at t
21 1 1 2 2 1 1 1 2 2 Xt Jt * Pt Pt * Xt Pt * Xt Jt * ) Pt * Xt ( = =
Result
Table 1. Descriptive statistics of monthly tourist hotel operation in Taiwan
(1999~2005)
Monthly data Min. Max. Mean Std.
Deviation
Coeff. of variation (CV)
Total available rooms 18,724 20,977 20,117 617 3%
Occupied rooms / month 136,814 485,271 386,600 57,682 15%
Occupancy rate 22% 78% 63% 9% 14%
Average room price (NT$) 2,301 3,152 2,903 130 4%
Total employees 6,013 7,694 7,198 295 4%
Jobs to NT$ million sales
Objective 1:
Jobs to sales ratio and occupancy rate
BStd.
Error Std. Coeff. t Sig.
(Constant) 1.324 0.013 98.250 0.000
log of occupancy rate -1.041 0.029 -0.915 -36.508 0.000
1999 0.119 0.015 0.213 8.177 0.000
2000 0.089 0.014 0.159 6.257 0.000
2001 0.090 0.014 0.160 6.211 0.000
2002 0.061 0.015 0.109 4.226 0.000
2003 0.039 0.016 0.069 2.442 0.017
Dependent Variable: log of jobs to sales ratio ; F = 323.8173 (p = 0.000), Adjusted R2 =
0.959
Objective 1:
Room price and occupancy rate
BStd.
Error Std. Coeff. t Sig.
(Constant) 8.044 0.010 779.348 0.000
log of occupancy rate 0.137 0.022 0.507 6.346 0.000
2003 -0.051 0.011 -0.388 -4.846 0.000
Dependent Variable: log of room price ; F = 49.5920 (p = 0.000), Adjusted R2 = 0.539
Objective 1:
Room employees and occupancy rate
BStd.
Error Std. Coeff. t Sig.
(Constant) 8.905 0.008 1,131.088 0.000
log of occupancy rate 0.122 0.015 0.501 8.180 0.000
1999 0.050 0.008 0.415 6.356 0.000
2000 0.046 0.008 0.387 5.944 0.000
2001 0.072 0.008 0.605 9.287 0.000
2002 0.065 0.008 0.541 8.298 0.000
Dependent Variable: log of employees ; F = 38.4502 (p = 0.000) , Adjusted R2 = 0.693
Objective 2:
Job estimates by scenario 1
50%
60%
(base level)70%
Pct change from 60% to 50% Pct change from 60% to 70%Scenario 1: Per million dollar spending in the accommodation sector
Jobs to sales ratio 7.73 6.40 5.45 21% -15%
Room price $2,835 $2,906 $2,968 -3% 2%
Employee number 6,771 6,923 7,055 -2% 2%
Labor efficiency1
(J/X) 0.022 0.018 0.016 18% -13%
6.4 5.5 5.9 7.0 7.7 4 5 6 7 8 9 50% 55% 60% 65% 70% Occupancy rate Jo b s p er N T $ m illio n sp en d in g
Objective 2:
Job estimates by scenario 2
Occupancy rate50% 60%
(base level)
70%
Scenario 2: Per 1,000 occupied rooms (e.g., a special event)
Room sales ( NT$ million’s) $2.84 $2.91 $2.97
Direct jobs using fixed ratio (standard I-O) 18.1 18.6 19.0
Direct jobs using predicted ratio 21.9 18.6 16.2
18.1 18.4 18.6 18.8 19.0 21.9 20.1 18.6 17.3 16.2 12 14 16 18 20 22 24 50% 55% 60% 65% 70%
occupancy rates
Jobs
pe
r 1,000 oc
c
upi
e
d room
s
Conclusion
Jobs to sales ratio is influenced by capacity utilization
Employee number does not increase/ decrease in direct proportion to
sales.
Standard I-O model will give biased estimates for
scenarios involving variation in CU
Overestimate jobs when CU is high
Underestimate jobs when CU is low