French and German Tourism in the Mediterranean - A Market Share Analysis

William Gatt,Joseph Falzon

doi:10.12735/jotr.v1i1p21

Abstract

Tourism is an important economic sector for Mediterranean countries, and these compete for market share. In our study we look at the evaluation of market shares amongst a group of seven Mediterranean countries for both German and French tourists. Our data shows that these shares have changed significantly over the period 1963-2009. We utilise the Almost Ideal Demand System, a model grounded in economic theory, to understand what has driven these changes. The estimated own-price elasticities indicate the sensitivity of demand to price increases in each country, while cross-price elasticities shed light on the relative complementarity and substitutability of the holiday destinations. We find that while Spain was relatively unaffected by the development of the tourism market in countries such as Cyprus, Malta and Turkey, Italy lost significant market share, in part due to a relative loss of competitiveness. An innovation of this study is an assessment of the stability of the elasticity estimates over the sample. In line with other studies in this area, we highlight that the results of this study can serve as useful information for policymakers in the formulation of policies on tourism market development.

Highlights

1.1 The Tourism Industry in the Mediterranean Countries in the Mediterranean Sea are touristic destinations in nature: they are blessed with many hours of sunshine, a warm climate, historic and artistic attractions, and an amusing nightlife
We first estimated the model by dropping the equation for Turkey
The own-price elasticities in Table 2 are all negative as expected, such that a 1% increase in prices in a destination is followed by an x% drop in its tourism demand

Summary

Introduction

1.1 The Tourism Industry in the Mediterranean Countries in the Mediterranean Sea are touristic destinations in nature: they are blessed with many hours of sunshine, a warm climate, historic and artistic attractions, and an amusing nightlife. These countries maintain unique cultures which introduces an element of heterogeneity in a tourist’s experience. Stakeholders in each country keep a close eye on the evolution of market shares, and seek to secure or increase their country’s share over time by implementing policies which make a holiday more competitive or unique. Whereas one country might decide to focus on attracting a mass market with competitive packages, another might focus on higher-end niche marketing

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Conclusion