Does a low-cost carrier lead the domestic tourism demand and growth of New Zealand?

Abstract

This study aims to provide a better understanding of the impact of New Zealand's low-cost carrier (LCC) on domestic tourism demand and growth. The panel data regression model and the two-stage least-square (2SLS) model (aims to control for the endogeneity effects) are used to empirically investigate the impact of LCC and the key determinants affecting New Zealand's domestic tourism using five regions (Auckland, Canterbury/Christchurch, Dunedin, Queenstown, and Wellington) from June 2009 to July 2015. The findings suggested that the LCC's services, GDP per capita, the regional tourism indicators (accommodation, and food and beverage), and land transport costs affected New Zealand's domestic tourism. The policy implications of the key finding regarding the significance of the LCC's operations on New Zealand's domestic tourism (local/regional tourism authorities and tourism operators), airline competition between incumbent airline (Air New Zealand) and the LCC (Jetstar), and airport authorities are discussed.