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Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D. John M. Antun, Ph.D. University of Tennessee Knoxville, TN
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Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Mar 30, 2015

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Page 1: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN

Stephen C. Morse, Ph.D.John M. Antun, Ph.D.

University of TennesseeKnoxville, TN

Page 2: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Area of Case Study: Sevier Co., Tennessee

Sevier County, TN(Gatlinburg, Pigeon Forge, Sevierville)

Home of:

DollywoodRipley’s AquariumGreat Smoky Mountains National Park (most visited NP in U.S.)Entertainment venues & attractions

Page 3: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Top 10 Tennessee Counties for Tourist

Spending in 20071) Davidson Co. $3,991 million (Nashville)2) Shelby Co. $3,064 million (Memphis)3) Sevier Co. $1,502 million (Gatlinburg, PF)

4) Knox Co. $796 million (Knoxville)5) Hamilton Co. $710 million (Chattanooga)6) Blount Co. $276 million (Maryville,

Townsend)

7) Sullivan Co. $270 million (Kingsport)8) Williamson Co. $251 million (Franklin,

Brentwood)

9) Rutherford Co. $237 million (Murfreesboro)

10)Washington Co. $188 million (Johnson City)

Source: TIA & TN Dept. of Tourist Development 3

Page 4: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

U.S. Average Retail Prices of Gasoline, 2004 - 2008

Source: U.S. Dept. of Energy

This Period of Analysis

Page 5: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Top 10 Ways Tourists Reduced Travel Spending in 2008

1) Take shorter trips (miles) 58%2) Look for discounts 38%3) Less on paid attractions35%4) Buy less souvenirs 33%5) Less expensive lodging 27%6) Less nights away home 25%7) More meals in room 18%8) Drive different vehicle 10%9) Split costs with others 9%10) More fast food 8%

Source: Jerry Henry and Associates5

Page 6: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Two Main Questions for Analysis…

1) In a slowing economy, do tourists substitute meals in rooms (grocery store sales) for restaurant meals?

2) Can a substitution rate of grocery store sales vs. restaurant sales me measured?

Page 7: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Creating & Understanding the Food Purchase Ratio Index, (FPR)

Restaurant Sales ($)

Grocery Store Sales ($)

FPR Index =

FPR > 1 (restaurant sales > grocery store salesFPR = 1 (restaurant sales = grocery store salesFPR < 1 (restaurant sales < grocery store sales

Page 8: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

FPR Index =Restaurant Sales ($)

Grocery Store Sales ($)

Example:

FPR = 1.35

Means: For every $1 spent in grocery stores, $1.35 is spent in restaurants

Page 9: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Magnitude Interpretation of Food Purchase Ratio Index, (FPR)

Page 10: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

2007 Monthly Restaurant & Grocery Store Gross Sales, Sevier Co., TN

10

Grocery Store sales

Source: TN Dept. of Revenue

Page 11: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Restaurant / Grocery Store Sales Ratio, Sevier Co., TN, 2006 – 2008

(June)

R/G sales ratio(FPR Index)

Page 12: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Data indicates that…• During 2006 & 2007: (gas prices below

$3/gal)– tourist had few substitutes of grocery store

sales for restaurant sales (saw increasing FPR from 2006 – 2007)

• For 2008: (gas prices above $3/ gal)– tourists did more substitution of grocery

store sales for restaurant sales (decreasing FPR 2007 – 2008 (June)

Page 13: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Implications• Lower restaurant sales and pressure on

price and discounts to attract customers

• Dollywood & Ripley’s Aquarium significantly increased their budget for point of sale advertising in Grocery Stores in 2008

Page 14: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Additional Research• Linear and non-linear correlations

among FPR and gasoline prices• Linear correlations among restaurant

sales & grocery store sales• Examination of data from other resort

areas such as Myrtle Beach, SC & Branson, MO.

Page 15: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Percent of Sevier Co. Tourist Dollar Spent on…

2006Attractions 17.7%

Lodging 30.4%

Gen. Mdse. 10.6%

Apparel 14.9%

Restaurant 26.2%

TOTAL 100%

Page 16: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Percent of Sevier Co. Tourist Dollar Spent on…

2006 2007Attractions 17.7% 18.2%

Lodging 30.4% 30.4%

Gen. Mdse. 10.6% 10.6%

Apparel 14.9% 14.2%

Restaurant 26.2% 26.4%

TOTAL 100% 100%

Page 17: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Percent of Sevier Co. Tourist Dollar Spent on…

2006 2007 2008Attractions 17.7% 18.2% 13.2%

Lodging 30.4% 30.4% 26.4%

Gen. Mdse. 10.6% 10.6% 14.2%

Apparel 14.9% 14.2% 16.7%

Restaurant 26.2% 26.4% 29.2%

TOTAL 100% 100% 100%

Page 18: Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D.

Thank You!

Questions? Comments?

John M. Antun, Ph.D.Stephen C. Morse, Ph.D.

University of TennesseeKnoxville, TN