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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.

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Presentation on theme: "Measuring Substitution Effects of Tourist Spending Among Restaurant Sales and Grocery Store Sales: Case Study in Sevier Co. TN Stephen C. Morse, Ph.D."— Presentation transcript:

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. John M. Antun, Ph.D. University of Tennessee Knoxville, TN

2 Area of Case Study: Sevier Co., Tennessee Home of: Dollywood Ripleys Aquarium Great Smoky Mountains National Park (most visited NP in U.S.) Entertainment venues & attractions

3 Top 10 Tennessee Counties for Tourist Spending in 2007 1)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. $237million (Murfreesboro) 10)Washington Co. $188 million (Johnson City) Source: TIA & TN Dept. of Tourist Development 3

4 U.S. Average Retail Prices of Gasoline, 2004 - 2008 Source: U.S. Dept. of Energy This Period of Analysis

5 Top 10 Ways Tourists Reduced Travel Spending in 2008 1)Take shorter trips (miles)58% 2)Look for discounts38% 3)Less on paid attractions35% 4)Buy less souvenirs33% 5)Less expensive lodging27% 6)Less nights away home25% 7)More meals in room18% 8)Drive different vehicle10% 9)Split costs with others 9% 10) More fast food 8% Source: Jerry Henry and Associates 5

6 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?

7 Creating & Understanding the Food Purchase Ratio Index, (FPR) Restaurant Sales ($) Grocery Store Sales ($) FPR Index = FPR > 1 (restaurant sales > grocery store sales FPR = 1 (restaurant sales = grocery store sales FPR < 1 (restaurant sales < grocery store sales

8 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

9 Magnitude Interpretation of Food Purchase Ratio Index, (FPR) Higher FPR means tourist spending more in restaurants, less in grocery stores Lower FPR means tourists spending less in restaurants, more in grocery stores

10 2007 Monthly Restaurant & Grocery Store Gross Sales, Sevier Co., TN 10 Grocery Store sales Source: TN Dept. of Revenue

11 Restaurant / Grocery Store Sales Ratio, Sevier Co., TN, 2006 – 2008 (June) R/G sales ratio (FPR Index)

12 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)

13 Implications Lower restaurant sales and pressure on price and discounts to attract customers Dollywood & Ripleys Aquarium significantly increased their budget for point of sale advertising in Grocery Stores in 2008

14 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.

15 Percent of Sevier Co. Tourist Dollar Spent on… 2006 Attractions17.7% Lodging30.4% Gen. Mdse.10.6% Apparel14.9% Restaurant26.2% TOTAL100%

16 Percent of Sevier Co. Tourist Dollar Spent on… 20062007 Attractions17.7%18.2% Lodging30.4% Gen. Mdse.10.6% Apparel14.9%14.2% Restaurant26.2%26.4% TOTAL100%

17 Percent of Sevier Co. Tourist Dollar Spent on… 200620072008 Attractions17.7%18.2%13.2% Lodging30.4% 26.4% Gen. Mdse.10.6% 14.2% Apparel14.9%14.2%16.7% Restaurant26.2%26.4%29.2% TOTAL100%

18 Thank You! Questions? Comments? John M. Antun, Ph.D. Stephen C. Morse, Ph.D. University of Tennessee Knoxville, TN


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