Key words: Economic multiplier, community tourism, walking street, Chiang Mai

1 Paper submission for the 5 th International Student Forum at Oita University, Japan Topic: An Analysis of Economic Multipliers of Community Tourism in Chiang Mai: Case Study of Wualai Walking Street and Tapae Gate Walking Street Pasin Khantaprab Abstract This paper focuses on studying the economic multipliers of community tourism in Chiang Mai Province, Thailand. Community tourism not only creates jobs in the area of tourism but also encourages growth in the economy as a whole. This is known as the multiplier effect, which could be explained as the amount of money that is spent by people involved in that specific tourism industry and the degree the money circulates through the rest of the economy. The researchers chose Wualai Walking Street and Tapae Gate Walking Street as the case study because both places are the top tourist attractions of Chiang Mai which continuously generate a significant amount of income to the province. In addition, both places are supported by Chiang Mai locals tax money with the aim to elevate the economics of the province as well as to promote the traditional culture. The objective of the study is to research the income of the vendors who participate on the walking streets in order to learn how the money was multiplied into the economic system. Data was collected from 200 vendors of both streets by using questionnaires along with interviewing methods. The result of this study indicated significantly positive multiplier effect for both walking streets. Hence, Chiang Mai policy makers should pay special attention to the walking street s activities and continuously support the project for the long term. Key words: Economic multiplier, community tourism, walking street, Chiang Mai Introduction Chiang Mai is the second largest city of Thailand with population of 1.67 million (information as of November 30, 2010). The Gross Primary Production (GPP) in 2009 was worth approximately 130,130 million Thai Baht. Its economic growth rate was 3.11% whereas per capita income was around 81,800 Thai Baht per person per year which was the third rank of all northern Thailand provinces (Chiang Mai Statistic Office (1), 2010). Chiang Mai has a high competency in being a tourism destination both in domestic and international level due to its variety of resources including cultures and natures. In addition, its transportation system, facilities, accommodations, and other public services are well-provided. As a result, Chiang Mai became the number one destination in the northern Thai region that tourists visit the most. In year 2010, there were approximately 4.34 million tourists who had visited Chiang Mai, which consisted of 1.24 million foreign tourists and 3.10 million Thai tourists. In 2010, the tourism sector generated approximately 62.61 million Thai Baht to the province (Chiang Mai Statistic Office (2), 2010). The executive board of Chiang Mai City developed the province s 4-year strategic plan (2011-2014) and set a vision of Chiang Mai entitled: To be a City of Life and Prosperity. The plan focuses on developing Chiang Mai to be a city that provides

2 happiness and prosperous life to residents and visitors and also to open doors for international trade. The economic strategies include improving capability of tourism and services in terms of nature, culture, and conservation in order to increase the communities income (Chiang Mai Strategic Planning Meeting, June 15, 2010). Chiang Mai s 4-year strategic plan has three main pillars: providing happiness and a good quality of life to its residents; developing economics, and supporting ecotourism and cultural conservation businesses. It can be viewed that to be successful in all three pillars, it needs income from the tourism sector to support all missions and to ensure the sustainability of the province s tourism. There are various types of tourism in Chiang Mai, which include natural-tourism, cultural-tourism, and urban-tourism. In many cases, these diverse tourisms are merged together harmoniously. An example of Chiang Mai s integrated tourism is the renowned Walking Streets. Chiang Mai s walking streets have been in practice for over ten years and are growing continuously. The walking streets have been supported by the city s policy makers in terms of budget, management, and policies. The direct stakeholders who gain benefits are the Chiang Mai locals as well as Chiang Mai visitors. Concepts of Chiang Mai s Walking Streets The Walking Street is a concept to promote tourism in Chiang Mai by selecting two main streets in Chiang Mai to be blocked from vehicle traffic one evening in a week. Wualai Walking Street is blocked on Saturday evening while Tapae Walking is blocked on Sunday night. The streets are turned into walking only areas and are filled with crafts, various local products and local food vendors. The idea is to support the locals to improve their economic status and also to promote northern Thai culture through the ability to display the products to a large audience. The vendors have to submit their applications to the Walking Street organizer to get permission to sell on the street. The main condition to sell on the street is that the item to be sold or services to be provided must be related to northern Thai culture and help promote the good image of Chiang Mai. Such products to be sold are, for example, handicrafts, northern Thai antique and contemporary arts, products created from local herbs or other locally sourced raw materials and traditional food. The expected benefits are to develop and fully utilize Chiang Mai urban areas and to promote Chiang Mai s valuable culture as well as to develop the city s economics. The main participators in walking street activities include vendors, stage performers, local residents, tourists, and organizers as shown in the figure below.

3 Vendors Residents Walking street organizers Tourists Stage performers Figure 1: Main participators in walking street activities Chiang Mai s 2 Main Walking Streets: Tapae and Wualai Tapae and Wualai streets are selected to be Chiang Mai s 2 main walking streets which are used as study sites of this research. Wualai Walking Street is located on Wua lai Street which is renowned as the oldest silver manufacturing and trading street in Chiang Mai. The entire street is about one kilometer long. This walking street opens on Saturday around 5:00-10:00pm. Therefore, the major theme of this walking street is silver handicraft. Tapae Walking Street (which in fact is located on Rajadamneon Street) is located in downtown Chiang Mai. It has the historical distinction of being the first business street in Chiang Mai. This area contains many accommodations for tourists as well as residential housing, which implies that many tourists and locals are located in this area. It opens on Sunday from 5:00-10:00pm. The products on this street have a higher diversity than those of Wualai Walking Street. Products that are sold consist of furniture, home decorations, clothes, bags, and local foods (PaiDuayGun.com, 2011). According to information from Chiang Mai Municipality, each street contains over 3,000 stalls and has more than 50,000 visitors per night. Each street generates more than 200 million Baht (Chiangmai-guideline, 2008). Research objectives The research aims to study Wualai and Tapae Walking Streets activities and the effects of generating income and promoting northern Thai cultures. The study focuses on the effects of the walking street activities in order to learn the multiplier effects. Such effects consist of three factors: direct economic effect to vendors, indirect economic effects to others not directly involved in the walking street activities, and noneconomic effects. The results of this research offer valuable information for Chiang Mai policy makers in order to develop strategies for boosting the economy for the city in the future. Literature reviews This study applies the concept of Tourism Multiplier Effect as a structure to conduct the research. According to prior research, the tourism industry not only creates

4 jobs, it is also a fundamental industry that allows other businesses to develop and grow. Tourism Multiplier Effect can be measured by the amount of money received from tourism activities such as money that tourists spent for their accommodations at the tourist destinations. The multiplier effects are the employees that hotels hire to provide services to the tourists, in addition, other people/businesses gain the effect as well such as restaurants, souvenir shops, to name just a few. A prior study presented that 70% of tourists spending was distributed to other related industries including tour agencies, airlines, hotels, and restaurants (Sasipalin, 2006). As a result, the economy of the area increases along with the increase in the amount of money in the economic circulation. It can be concluded that tourism industry has generated a significant income to the nation and plays an important role in country s economic development. Tourism development is established on the assumption that higher tourism demand will result in an increase of newly established supply, which will in turn generate economic growth. According to Keynes s economic theory, when one transaction occurs in the economic system, it will generate income for somebody else, and then when that person spends that money, others will receive that money and spend it; hence the economic cycle is continuously. This concept is called the multiplier effect and can be explained as shown in Figure 2 below. Figure 2: Tourists Multiplier Effect Source: http://geographyfieldwork.com/touristmultiplier.htm

5 Besides the economic effects of the tourism sector, other dimensions should be taken into account. According to Getz (2008), to assess tourism effects, four dimensions should be considered: economics, social, cultural, and environmental. Gratton, Dobson, and Shibli (2000) explained that the assessor should convert all of the tourists expenses in the form of direct, indirect, and induce effects. Direct effects mean direct expense that tourists spend on that particular tourism activity such as accommodation and transportation cost. Indirect effects happen after direct effect, after the person gains income from tourists activities, those people (such as hotel owners and souvenir sellers) spend this money on something else which may not be related to the original tourism activities, such as pay for their children s school. Induce effects mean nonmonetary effect such as city image and cultural heritage being preserved. This concept can be illustrated as shown in Figure 3 below. Conceptual Framework Direct Effects Indirect Effects Multiplier Effects Induce Effects Figure 3: Multiplier Effects Research methodologies The researchers collected data from two sources, primary and secondary data. Primary data was collected from direct/participative observation at research sites, interviews with vendors, tourists, and organizers of the walking streets, and using questionnaires to collect data from vendors. While secondary data was retrieved from reviewing related document. Two hundred questionnaires were distributed to vendors on Wualai and Tapae Walking Streets, 100 questionnaires from each street. The questionnaire focused on three main types of multiplier effects: direct effects, indirect effects, and induce effects. The researchers applied descriptive statistics to analyze the data. Some questions were open-ended questions and some applied 5-level rating scales as appropriate to the data collected. Results Informants Background The informants of this research consist of 200 vendors from Wualai and Tapae Walking Streets, 134 are female and 66 are male, with age range from 11 years old to 80 years old. 177 of them are Chiang Mai locals whereas others are from other provinces around Thailand. Of those from Chiang Mai, 125 reside in Chiang Mai city while the others live in other districts. 127 of the informants are entrepreneurs and the

6 others are from various careers such as students, government officials, artists, and company employees. The items for sale are diverse including art pieces, ceramic works, jewelries, clothes, shoes, herbal products, wooden products, home decorations, and so on. It is notable that 72 of 200 informants do not sell their products elsewhere, while the rest sell their products at other places and through different channels such as other walking streets, at local markets, in shopping malls, and online. Their total income (income from their main occupations plus income from doing business on this walking street) range from below 10,000 to 90,000 Baht per month. The majority of the vendors (90 informants) answered that their income was below 10,000 Baht per month. The average income of the informants was 19,106 Baht per month. Par their income just from doing business on the walking street, their income range from below 5,000 Baht to 35,000 Baht and the average was 3,445 Baht. Vendor s customers were international tourists, domestic tourists, and locals. 181 informants expressed that their businesses are sustainable since they have been running their business for more than 6 months. 110 of them said that they do business on walking streets because they would like to earn extra income while 23 of them said that they would like to use the walking street as a channel to get in contact with new customers. Multiplier Effects: Direct Effects The direct effect in this research implies direct economic effect to vendors. According to the survey result, the informant who were vendors on the walking streets ranked direct effect of doing business on walking streets by the level of agreement on a score of 5 (5=highest) as: increased income (4.25/5), pride to be involved in this activity (4.03/5), increased product sales and developed network with customers (3.89/5), gained new ideas to develop new product designs (3.86/5), and increased brand awareness (3.84/5). Other direct effects include improving quality of life, meet new people, utilize free time in a productive ways, and find channels to export. Multiplier Effects: Indirect Effects Indirect effect in this research refers to economic effects to others not directly involved in the walking street activities. According to the result of this study, indirect effects can be classified in various categories. The result summation is displayed in the table below.

7 Table 1: Indirect Effects of Wualai and Tapae Walking Streets Unit: Baht Indirect Effect Mean Max Min SD Expense that has been reinvested such as 10,030.5 115,900 500 14,094 purchasing raw materials, finished product for re-sale, labor cost, and rent Living expenses such as food, clothing, and 6,070 50,000 150 6216.6 other consumer products Transportation expenses such as petrol cost 2,477.6 50,000 100 4,043.5 Communication expenses such as mobile 829.1 5,000 100 840.3 phones and internet fee Educational expenses for self or 6,130.9 50,000 300 9,319 dependents such as tuition fee for children Entertainment expenses such as movies 1,612.4 25,000 100 2,711.2 and travelling costs Savings 3,869.5 50,000 100 5,811.6 Insurances expenses 2,781.6 30,000 200 5,048 Utilities such as water and electricity 1,257.1 15,000 108 1,600 Total 35,058.70 Multiplier Effects: Induce Effects In this study, induce effects imply non-monetary effect such as city image and cultural heritage being preserved. This study categorized induces effects into four categories: economics, social, cultural, and environmental. According to the survey result, the informant who were vendors on the walking streets rated induce effects of walking street activities by level of agreement from score of 5 (5=highest) as follows. In the economic category, it was found that informants viewed the walking street activities helps to increase number of tourists in Chiang Mai (4.42/5), help vendors find ways to increase their income (4.37/5), provide vendors the space to sell local products at moderate prices (4.33/5), increase province s income (4.25/5), and to provide jobs to locals (4.19/5). In the social category, the informants agreed that walking streets helps to enhance the province s good image (4.37/5), help reinforce family bonds (4.18), and residents and tourists have more places for recreation (3.82/5). In the cultural category, the informants perceived that walking streets help develop cultural pride for the locals (4.31/5), and help promote and conserve culture and local heritages and is a place for visitors to learn about Lanna culture (4.28/5). In the environmental category, the informants agreed that walking street activities transform the city areas into public places where people can visit for recreation (4.23/5), the landscape and city scenery has improved (3.86/5), residents get new and better infrastructures (3.72/5), and people can learn about conservation of energy and natural resources (3.68). Discussions Wualai and Tapae Walking Streets are successful projects that helps boost Chiang Mai economy from both tourists and residents activities. The walking streets not

only generate a significant amount of income to the province which results in an increase of money circulating within the province, but also aids in promoting other values such as cultural values, social values, and environmental conservation. The effects of such activities have many layers; the first layer is called the direct effect, which means effects that directly go to the vendors. The results showed that vendors were highly satisfied with their increased income and sales volume; they have pride in being involved with walking street activities, they developed new networks through walking street channels, they had a chance to promote their product and were able to raise brand awareness, and also gain new ideas for product development. The second layers is called indirect effect which means the effect after the vendor has earned income from their business on walking streets and what they do with the earned income. The first stage of this effect is to invest back into their own business on walking streets which helps to sustain their business in the long term. The second stage of this effect is to spend their income on other things outside the walking streets. This layer plays a significant role in improving the city s economics because it is then distribute to other areas in the economic system. It was found that the money generated from the walking streets was then transferred to other business sectors such as education and entertainment sectors. The last layer is called induce effect and is classified into four dimensions: economic, social, cultural, and environmental. The results of this research indicated that all dimensions were met successfully from the effects of the activities on the walking streets. Summation of the research result is illustrated in the figure below. 8

Figure 4: Multiplier Effect Model of Walking Street 9

10 Conclusions The result of this study has shown that the multiplier effect of Wualai and Tapae Walking Streets were significantly positive. The walking streets are successful in all dimensions. The findings in the present research will be given to Chiang Mai policy makers as confirmation of the benefits of the walking street activities. The findings can also be used to show that the benefits outweigh the investment if considered not strictly on economic results. The findings can also be used to develop future strategies for Chiang Mai s economy. The research also confirms that policy makers should allocate a budget to support the walking street activities and continuously invest in the activities to ensure the sustainability of such an important tourist attraction. Reference list Chiang Mai Statistic Office (1). 2010. Chiang Mai Information. [Online]. Retrieve from http://www.chiangmai.go.th/meet_file/intro3.pdf (February 18, 2011). Chiang Mai Statistic Office (2). 2010. Chiang Mai 4-Year Strategic Plan [Online]. Retrieve from http://www.chiangmai.go.th/upfiles/hdata/7632ad50ef.pdf (February 15, 2011). Chiangmai-Guideline. 2007. Chiang Mai s Walking Street. [Online]. Retrieve from http://www.chiangmai-guideline.com/thai_v/walkingstreet.htm (15 February, 2011). Getz, D. (2008), Event tourism: definition, evolution, and research, Tourism Management, Vol. 29 No. 3, pp. 403-28. Gratton, C., Dobson, N. and Shibli, S. (2000), The economic importance of major sports events: a case-study of six events, Managing Leisure, Vol. 5 No. 1, pp. 17-28. Gotogether.com (2011). Go together all over Thailand [Online]. Retrieve from http://www.paiduaykan.com/76_province/north/chiangmai/walkingstreet.html (15 February, 2011). Numsawad Panich. 2010. History of Chiang Mai s Walking Street. [Online]. Retrieve from http://www.chiangmaiwalkingstreet.com/index.php?lay=show&ac=article&id=31 0802 (15 February, 2011). Sasipalin, Watchareewan. (2006). Activity arrangement of tourism : a case study of the walking street in Chiang Mai. Independent Study. Chiang Mai University. Tourism Multiplier Effect (2011). The Tourism Multiplier Effect [Online]. Retrieve from http://geographyfieldwork.com/touristmultiplier.htm (2 February, 2011).