Interaction effects of air services on tourism demand

Abstract

Air transport attributes can affect both budget and time constraints of travelers. Therefore, in addition to income and tourism prices, there is a theoretical case for including airfare, flight frequency, and their interaction, in a given tourism demand model. This study explicates the theoretical framework and empirically tests the significance of these effects. Our study finds that tourists' responsiveness to airfare (flight frequency) intensifies with increase in flight frequency (decrease in airfare) of direct air services. The practical implication is that pricing strategy and capacity expansion reinforce each other in generating tourism demand. Additionally, for research, the findings emphasize the need to disentangle the effects of aircraft size and travel distance in modeling air transport – tourism demand relation.