The Economics and Finance of Cultural Heritage This book analyses the economic and financial profiles of heritage assets as tourist attractions. Offering both theoretical insights, methods, and global empirical examples, it considers how heritage assets can create economic and social value for a region. It offers an analysis of micro- and macroeconomic characteristics of heri- tage assets and their financial management. The importance of innovation in light of technological and market transformations is considered, as well as the sustainable management of heritage assets environmentally and in terms of sustainable tourism. The book delves into the financial assessment of heri- tage assets with a focus on evaluation models, the technique of project finan- cing and wealth management in the art sector. These topics are illustrated with cases studies of heritage assets managed as tourist attractions to out- line successful management strategies. The book draws on examples from a range of sites and locations across Italy, Spain, the United Kingdom, New Zealand, and the United States to show how heritage assets can be an eco- nomic stimulus for the development of local economies. The book will be of interest to academics and students at both under- graduate and postgraduate levels in the fields of tourism economics, cultural studies and environmental studies. Vincenzo Pacelli, is Aggregate Professor of Banking and Finance at the University of Foggia, Italy, where he teaches a course on the Economics of Financial Markets. He obtained a PhD in Banking and Finance from the University of Rome, La Sapienza, Italy. Edgardo Sica is Aggregate Professor of Economics at the University of Foggia, Italy. He obtained a PhD in Technology and Innovation Management at the SPRU, UK. His main research interest lies at the intersection of sus- tainability, innovation, and tourism economics. Routledge Cultural Heritage and Tourism Series Series editor: Dallen J. Timothy, Arizona State University, USA The Routledge Cultural Heritage and Tourism Series offers an interdiscip- linary social science forum for original, innovative and cutting- edge research about all aspects of cultural heritage-b ased tourism. This series encourages new and theoretical perspectives and showcases ground- breaking work that reflects the dynamism and vibrancy of heritage, tourism and cultural studies. It aims to foster discussions about both tangible and intangible heritages, and all of their management, conservation, interpretation, political, conflict, con- sumption and identity challenges, opportunities and implications. This series interprets heritage broadly and caters to the needs of upper- level students, academic researchers, and policy makers. Heritage of Death Landscapes of Emotion, Memory and Practice Edited by Mattias Frihammar and Helaine Silverman Industrial Heritage and Regional Identities Edited by Christian Wicke, Stefan Berger and Jana Golombek Deconstructing Eurocentric tourism and Heritage Narratives in Mexican American Communities Juan de Oñate as a West Texas Icon Frank G. Perez and Carlos F. Ortega Creating Heritage Unrecognised Pasts and Rejected Futures Edited by Thomas Carter, David C. Harvey, Roy Jones, and Iain J.M. Robertson The Economics and Finance of Cultural Heritage How to Make Tourist Attractions a Regional Economic Resource Vincenzo Pacelli and Edgardo Sica For more information about this series, please visit: www.routledge.com/ Routledge- Cultural- Heritage- and- Tourism- Series/ book- series/ RCHT The Economics and Finance of Cultural Heritage How to Make Tourist Attractions a Regional Economic Resource Vincenzo Pacelli and Edgardo Sica First published 2021 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2021 Vincenzo Pacelli and Edgardo Sica The rights of Vincenzo Pacelli and Edgardo Sica to be identified as the authors of this work have been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-i n- Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-i n- Publication Data A catalog record has been requested for this book ISBN: 978- 0- 367- 89475- 7 (hbk) ISBN: 978- 1- 003- 01939- 8 (ebk) Typeset in Times New Roman by Newgen Publishing UK Contents List of illustrations vi Introduction 1 1 Micro- and macroeconomic characteristics of heritage assets 5 2 Heritage assets, innovation and environmental sustainability 24 3 Financing heritage assets and art wealth management 40 4 The valuation of heritage assets 62 5 Caves as environmental and tourist resources: analysis of the Waitomo Glowworm Caves and the Caves of Castellana 81 6 Heritage assets as a cultural and tourist resource: the cases of the Pinacoteca di Brera, the National Archaeological Museum of Taranto and the RavennAntica Foundation 103 7 How a heritage asset as a tourist attraction can create regional value: best practice from Europe and the United States 127 Index 149 newgenprepdf Illustrations Figures 6.1 SWOT analysis for the Pinacoteca di Brera 108 6.2 SWOT analysis for MArTA 114 6.3 SWOT analysis for the RavennAntica Foundation 120 Tables 1.1 Average expenditure of tourists in Italy, 2017, by destination (CISET, 2018) 9 1.2 Shopping basket of cultural tourists (CISET, 2018) 10 1.3 Classification of public and private goods 12 1.4 Economic activities intended to meet the demand for cultural heritage assets according to the NACE Rev.2 classification (ISTAT, 2009) 16 1.5 Performance indicators of the heritage assets sector 18 2.1 Tourism Competitiveness Index for Italy, 2017, disaggregated data 35 6.1 Visitors and revenue of the Pinacoteca di Brera, 2011– 2016 110 6.2 MArTA visitors and revenues, 2011– 2017 118 6.3 Visitors to Foundation RavennAntica museums, 2002– 2017 (Fondazione RavennAntica) 122 6.4 Visitors to and income generated by RavennAntica Foundation museums, 2010– 2017 (Fondazione RavennAntica) 123 Introduction Cultural heritage describes an extremely dynamic and constantly expanding set of assets characterised by strong and expressive aesthetics. The notion was first formalised in 1960s Italy by the Franceschini Commission to represent important assets of civilization, history and culture that, by virtue of their recognised artistic value, belong to the community and are enhanced and protected, accordingly. Today, cultural heritage in Italy is governed by Legislative Decree No. 42 of 22 January 2004, which defines it as the entirety of cultural and landscape assets. In fact, cultural heritage includes not only objects of art and historical value (i.e. documents, books, etc.) but also environmental assets, such as natural or man- made landscapes, that pro- vide evidence of civilization. Due to the heterogeneous nature of cultural heritage assets, in 2009, UNESCO classified these items into six domains, distinguishing between: (i) museums, archaeological sites, monuments and natural landscapes; (ii) performing arts; (iii) visual arts and crafts; (iv) books, newspapers and magazines; (v) radio, television, film and video games; and (vi) fashion, architecture, advertising and design. In this book, specific ref- erence will be made to heritage assets in the first domain – that is, cultural and landscape assets – and, specifically, tourist attractions. Cultural tourism is a strategic resource for Italy, which enjoys a tremendous number of heri- tage assets in the form of museums, archaeological sites, environmental assets, national parks and marine areas; thus, the combination of culture and tourism is a competitive asset for the national tourism system. To avoid the paradox of abundance, Italy should – with foresight and determination – develop a long- term industrial policy based on the sustainable valorisation in tourist terms of its extraordinary environmental, artistic and cultural heritage; subsequently, this policy should be carried out by precise and courageous political decisions at the national and local levels, supported by adequate investment, in order to trigger virtuous and lasting multiplicative mechanisms of income and wealth. The present book analyses the economic, financial and management profiles of heritage assets that can also be considered tourist attractions. Chapters 1- 4 focus on, from a purely theoretical point of view, the micro- and macroeconomic characteristics of heritage assets and examines the topics of financing and assessment. In Chapters 5–7 , national and international cases 2 Introduction of heritage assets as tourist attractions are described, through an empirical approach. In this part, the focus is on the management models used by the tourist attractions to become economic drivers for local area, i.e. how they create economic and social value for their region, and not only for the private entities that manage them. In particular, Chapter 1 analyses the economic dimension of heritage assets, in terms of both related business activities and attempts to make these assets more economically productive, i.e. greater sources of income. This valorisa- tion process should not be conceived in terms of commodification but instead as a way to conserve assets due to the income they generate. The chapter continues with an analysis of the micro- and macroeconomic profiles of heri- tage assets. From a microeconomic perspective, the need to separate cultural and landscape assets from their value as tourist attractions is particularly evi- dent, since each of these aspects requires a different theoretical approach. The macroeconomic analysis, on the other hand, focuses on the complexity of defining the heritage asset sector, identifying its performance indicators and determining the multiplier effects that heritage assets can determine on the local economy. Chapter 2 focuses on two of the performance indicators identified in Chapter 1: innovation and environmental sustainability. The importance of innovation lies mainly in the opportunities to expand the tourist use of heri- tage assets in light of technological and market transformations. Innovation also entails new skills and, consequently, new training needs, with extremely positive effects in terms of employment. The analysis focuses on technological innovation and digitisation – both of which are particularly relevant for the heritage asset sector as they offer significant opportunities for modernisation. The issue of sustainability, on the other hand, relates to the sustainable man- agement of cultural heritage, recognising the positive externalities it can gen- erate. The analysis focuses in particular on the environmental sustainability of heritage assets, first in their general meaning as cultural and landscape assets – in terms of energy savings and use of renewable sources – and then in their specific role of tourist attractions – in terms of sustainable tourism and load capacity. Chapter 3 explores the issues of heritage asset financing and wealth man- agement in the arts sector. In particular, project financing is examined in depth, as this technique is considered particularly useful and suitable for cultural and environmental heritage financing due to the medium size of the necessary funds, the complexity of the operations and the often mixed body of public and private stakeholders. It then turns to the issue of strategic, economic and financial planning, through an analysis of business plan management, which is considered an essential tool for the public and private financing of heri- tage assets. After analysing the main opportunities for the public financing of heritage assets in Italy and Europe and raising some critical considerations over European and Italian gaps in the coordination and strategic planning of investment policies for cultural and environmental heritage, the chapter Introduction 3 concludes by examining the management of assets invested in art and the development of financial services related to the art world. Chapter 4 deals with the complex and controversial issue of the valuation of heritage assets as economic assets capable of generating income given appropriate investment in their management, protection and conservation. While the process of estimation determines the value of a cultural or land- scape good, the mechanisms of competition and negotiation determine its price. Often, the value and price of a cultural or landscape good do not coin- cide. For this reason, Chapter 4 initially examines the difference between the price and value of a cultural and landscape asset and then outlines the main methodologies used to value such heritage assets. In this respect, it should be noted that the value of a culture or landscape good is not only economic but also social and cultural; therefore, its value – or ‘sensual side’ – is dif- ficult to measure. Moreover, the cultural or social benefits it can generate for the community are difficult to quantify from an economic point of view and not necessarily quantitatively identified in the value or price of the asset considered. Notwithstanding these challenges, it seems safe to assume that a public or private entity would be motivated to invest in a given cultural or landscape asset (to secure its protection, preservation or enhancement) as long as the asset is at least potentially able to generate some benefit (eco- nomic, social, scientific or cultural) for its shareholders or stakeholders. It is therefore clear that the assessment of heritage assets, while complex and slippery, is of absolute importance for a multitude of subjects, such as public contributors, local residents, public or private investors or administrators of the public or private entities. Chapter 4 concludes the first – purely theoretical – part of the book. The second part opens with Chapter 5, which deals with the empirical analysis of case studies. The case study methodology has the dual purpose of conveying both the main connotations of the phenomena under analysis and the dynamics of a given process. The qualitative approach thus allows to describe, explain and provide insight into situations and phenomena in terms of their dynamics and evolution. Following this methodological approach, Chapter 5 analyses caves as an environmental and tourist resource, first describing the general state of play of Italian caves and then exploring the specific cases of the Waitomo Glowworm Caves in New Zealand and the Castellana Caves in Italy. Speleological tourism (i.e. tourism linked to caves), has recently become a valuable eco- nomic resource for many areas – and particularly Italy, which boasts a large number of natural cavities equipped for tourism. It is estimated that Italian tourist caves are visited by more than 1.5 million persons each year, gener- ating an aggregate annual turnover of approximately 20 million euros. The chapter also considers services related to cave visits, such as speleological museums, bookshops and photo and gadget vendors in the cave vicinity. When these related services are considered, as well as local catering services, accommodation facilities, commercial activities and sports venues, the annual