Tourism Price Research Articles

Revisiting Tourism Flows to the Caribbean: What is Driving Arrivals?

The Caribbean share of the global tourism market has been declining. This study examines what is driving tourism flows. It estimates the determinants of tourism and explores variations based on sample differences, and also constructs a static nominal price comparison index. The paper finds that: (i) tourism arrivals and expenditure are sensitive to both price and income factors in source markets; (ii) price and income elasticities of tourism have declined since 2008; (iii) price elasticity is statistically insignificant for “high-end†destinations; and (iv) the nominal cost of an average one week beach holiday in the Caribbean is higher than in other beach destinations around the world. These results point to the need for structural reforms to raise product quality, cost reduction or containment in “low-end†destinations, including possibly via exchange rates, and an adjustment in aggregate consumption to adapt to the implications of a lower contribution to GDP from tourism.

Revisiting Tourism Flows to the Caribbean: What is Driving Arrivals?

The Caribbean share of the global tourism market has been declining. This study examines what is driving tourism flows. It estimates the determinants of tourism and explores variations based on sample differences, and also constructs a static nominal price comparison index. The paper finds that: (i) tourism arrivals and expenditure are sensitive to both price and income factors in source markets; (ii) price and income elasticities of tourism have declined since 2008; (iii) price elasticity is statistically insignificant for “high-end” destinations; and (iv) the nominal cost of an average one week beach holiday in the Caribbean is higher than in other beach destinations around the world. These results point to the need for structural reforms to raise product quality, cost reduction or containment in “low-end” destinations, including possibly via exchange rates, and an adjustment in aggregate consumption to adapt to the implications of a lower contribution to GDP from tourism.

Modelling tourism demand for South Africa: An almost ideal demand system approach

This paper models tourism demand for South Africa from the UK and the USA, using an almost ideal demand system. An error-correction almost ideal demand system (EC-AIDS) is applied to quantify the responsiveness of UK and USA tourism demand for South Africa, relative to changes in tourism prices and expenditure or income. Short-term own-price, cross-price and expenditure elasticities are derived from the EC-AIDS models. One of the key findings of the paper is that tourism from the UK and USA is not sensitive to price changes in South Africa in the short term. Tourism to South Africa is found to be more income-elastic than price-elastic, indicating that the country is vulnerable to changing world economic conditions. Even though price competitiveness does not yet seem to be a key concern, significant substitution effects are present, with especially Spain and Malaysia benefiting from a decline in South Africa’s price competitiveness.

Research Note: Does Crime Deter UK Tourists from Visiting Trinidad and Tobago?

In this paper the deterrent effect of crime on tourism in Trinidad and Tobago is investigated using annual data for the period 1978– 2007 and focusing on the UK source market. The findings indicate that both property crime and violent crime have devastating long-run effects on the tourism sector. The authors also find that income, the price of tourism and transportation costs have significant impacts.

Domestic tourism demand of urban and rural residents in China: Does relative income matter?

The aim of this research is to investigate the domestic tourism demand of urban and rural residents in China. Based on the data from the National Household Tourism Survey, we specify Chinese domestic tourism demand as a function of absolute income, relative income, domestic tourism price, and substitute price. As a major contribution of this study, relative income is measured using the distance between individual income and average income over a city/province. Based on the estimation results from multilevel models, this paper highlights the effect of relative income on domestic tourism demand in some sub-regions of China. Furthermore, regional differences between residents in different sub-regions and different patterns of determinants between urban and rural residents are identified and discussed.

A Panel Data Analysis of International Tourist Arrivals from ASEAN Countries to Malaysia

Investigating the flows of inbound tourists from ASEAN countries to Malaysia, the present paper has identified that the level of income in tourists’ country of origin, the relative price of tourism in Malaysia, the relative price of tourism in the substitute destination, the 1997/98 Asian financial crisis and the spread of the SARs in Asia are the significant determinants of their arrivals. Based on the sample period of 16 years (i.e; 1994 through 2009) and using the panel data econometric technique (fixed-/random-effects model) to analyse the data, the policy implication of the paper's findings that could be conceived is that, if Malaysia were to attract more tourists from ASEAN countries, it needs to maintain its price competitiveness relative to other countries in the region.

International Tourism Demand in Malaysia by Tourists from OECD Countries: A Panel Data Econometric Analysis

This paper investigates the significance influence of selected economic and non-economic factors in determining tourism demand for Malaysia by tourists from OECD countries. Based on the sample of 15 years (1995 to 2009), the data are analysed using panel data econometric technique (fixed-/random effects model). The study shows that relative price of tourism is statistically significant in influencing the demand for tourism by tourists from OECD countries to Malaysia. This reveals that tourists from OECD countries are sensitive to the price changes. As for substitute price in the competing destination, the result proved that Singapore is a substitute destination for Malaysia. In addition, the non-economic factors such as the spread of SARS and global economic crises are also significant in influencing the demand for tourism in Malaysia by tourists from OECD countries.

Modeling Japanese Tourism Demand for Asian Destinations: A Dynamic AIDS Approach

This paper investigates the expenditure allocation of Japanese international tourism in its five major Asian destinations, China, Hong Kong, Korea, Taiwan, and Thailand. The dynamic of linear approximation the almost ideal demand system is used to determine the long-run equilibrium while the short-run dynamics are represented by an error correction mechanism. The empirical results indicate that the changes in market shares of Japanese outbound tourism are significantly influenced by the changes in tourists' expenditure, rather than the changes in relative tourism prices. The results show that Japan expenditure rises, the market share of Taiwan and Thailand declines, while Korea benefits. In addition, price competitiveness is important for Japanese demand for Korea, but is relatively unimportant for the other destinations.

Tourism Equilibrium Price Trends

Problem statement: A review of the tourism history shows that tourism as an industry was virtually unknown in Malaysia until the late 1960s. Since then, it has developed and grown into a major industry, making an important contribution to the country's economy. By allocating substantial funds to the promotion of tourism and the provision of the necessary infrastructure, the government has played an important role in the impressive progress of the Malaysian tourism industry. One of the important factors which can attract tourists to Malaysia is the tourism price. Has the price of tourism decreased? To answer this question, it is necessary to obtain the equilibrium prices as well as the yearly trend for Malaysia during the sample period as it will be useful for analysis of the infrastructure situation of the tourism industry in this country. The purpose of the study is to identify equilibrium tourism price trends in Malaysian tourism market. Approach: We use hotel room as representative of tourism market. Quarterly data from 1995-2009 are used and a dynamic model of simultaneous equation is employed. Results: Based on the result during the period of 1995 until 2000, the growth rate of the equilibrium price was greater than consumer price index and producer price index. Conclusion: In the Malaysian tourism market, new infrastructure during this period had not been developed to keep pace with tourist arrivals.

Modelling International Tourism Demand for the Caribbean

This paper provides models of international tourism demand for four destination countries (the Bahamas, Barbados, Jamaica and St Lucia) in the Caribbean region, where visitor arrivals are mainly from Canada, Germany, the UK and the USA. The authors use a less restrictive econometric technique – the autoregressive distributed lag (ARDL) bounds test – to test for cointegration among the variables in the tourism demand equations. The empirical results from the bounds test indicate the existence of a unique long-run relationship between tourist arrivals, per capita real income, tourism prices and transport costs. The estimated results show that changes in tourists' income, tourism prices, travel costs, the 9/11 2001 terrorist attacks on the USA and the 2003 US–Iraq War significantly affect tourists' travel decisions. The results also show that tourism demand for Caribbean destinations is highly income elastic in both the short run and the long run, but relatively price inelastic in both periods. The price inelasticities suggest that if policy makers and/or tourism stakeholders increase the prices of the tourism products and services, this would not decrease the number of tourist arrivals proportionally but would increase total tourism receipts or revenues. Overall, the CUSUM and CUSUMSQ stability tests reveal that the parameters of the international tourism demand models are stable and, as such, they can be used for policy analysis and forecasting.

Study on Urban Residents’ Willingness to Buy the Products of Rural Tourism

The level of value injected into the rural economy is dependent consumers acceptance of rural tourism. Data was obtained through primary research conducted in the three provinces in China of Hunan, Guangdong and Gansu, the paper explores urban residents’ attitude to rural tourism and then estimates their willingness to pay for rural tourism products, utilizing hypothesis-evaluation to find a valid conclusion. The results show that their willingness is affected by gender, educational background, level of income; personal travel frequency, tourism form, aggregate demand form rural tourism, acceptance for rural tourism and the price of tourism in other cities have significant effect on their willingness to pay. The WTP proves that urban residents are usually willing to pay 35.1% more for non-rural tourism than they are for rural tourism.

Estimating Price Effects in an Almost Ideal Demand Model of Outbound Thai Tourism to East Asia

Estimating Price Effects in an Almost Ideal Demand Model of Outbound Thai Tourism to East Asia This paper analyzes the responsiveness of Thai outbound tourism to East Asian destinations, namely China, Hong Kong, Japan, Taiwan and Korea, to changes in the effective relative price of tourism, total real total tourism expenditure, and one-off events. The nonlinear and linear Almost Ideal Demand (AID) models are estimated using monthly data to identify the price competitiveness and interdependencies of tourism demand for competing destinations in both long-run (static) and shortrun (dynamic) error correction specifications. Homogeneity and symmetry are imposed in the long-run and short-run AID models to estimate the elasticities.

The face value of foreign currency on consumer price perception—The moderating effect of product substitution

Consumers shopping in a foreign environment evaluate prices based on the relationship between the local currency's face value and their home currency. The face value effect suggests that when a foreign currency is a multiple of domestic currency (HDCs), consumers overestimate the actual value. In contrast, when their domestic currency (LDCs) is a fraction of the foreign currency, consumers underestimate the actual value. Three experiments examine a premium product's moderating effect on foreign currency face values. Results show the foreign currency's face value biases consumer price perception. Testing the face value effect, product substitution serves as an important moderator. The findings suggest implications for regional pricing, Internet pricing, and international tourism pricing.

The unwritten price of cosmetic tourism: An observational study and cost analysis

Cosmetic tourism, driven by the promise of inexpensive operations abroad, is increasingly popular despite warnings from professional bodies regarding associated risks. Increasing numbers of individuals have presented to our department requesting NHS treatment of complications from such surgery. We set out to characterize these patients and evaluate costs incurred through their assessment and management. An observational study was conducted from 2007 to 2009 on patients presenting to a tertiary referral Plastic Surgery practice with complications of cosmetic tourism surgery. Demographic characteristics, as well as those related to the operation, were recorded. Hospital patient flow pathways were constructed, cost analysis performed using Patient Level Costing, and expenditure and profitability calculated. Nineteen patients presented within the study period. Most operations were performed in Europe or Asia, and were primarily breast augmentation procedures (n=13). The principal complications were wound infection or dehiscence, and poor cosmetic results. Eleven patients received NHS treatment, at a cost of £120,841. The mean cost for all patients' management was £6360 (range: £114-£57,968), rising to £10,878 for those accepted for treatment. For 8 of the 9 patients (89%) for whom full patient level costing was available, the hospital incurred a financial loss. The costs to the NHS of managing complications of cosmetic tourism are substantial, and underestimated by central funding agencies.

Differentiated price loss aversion in destination choice: The effect of tourists’ cultural interest

This article looks into the differentiated effects of loss aversion depending on whether individuals show cultural interest when choosing a destination. Based on the fact that perceived value implies not only sacrifices but also the expectations of a certain level of quality and prospects of satisfaction, together with the idea the Prospect Theory applies to tourism prices, the article states the hypothesis that interest in culture when choosing a destination lowers people’s loss aversion. By incorporating the reference-dependent model into a Multinomial Logit Model with Random Parameters – which controls for heterogeneity – the empirical application shows that culture-interested tourists are less loss averse; i.e. the negative effect of finding a higher than expected price diminishes with cultural interest. The expectation of enjoyment of these attributes and the more conscious attitude toward maintenance/restoration activities of cultural sites are hypothesized to lead prices to be evaluated differently when selecting a destination.

Using the Panel Cointegration Approach to Analyse the Determinants of Tourism Demand in South Africa

Estimating tourism demand has become a challenge among researchers, as identification of key determinants is important for policymakers at a time when tourism has become the world's largest industry. Using a theoretical framework based on the gravity model, this paper models inbound tourism demand for South Africa to estimate price and income sensitivities as well as the impact of other important factors that affect tourist flows, such as the location of markets and socio-political factors. Given the non-stationary but cointegrated nature of the panel data, panel cointegration estimation techniques are employed. The results show that tourists are sensitive to price changes in South Africa and also to tourism price changes in competing destinations. The level of development, tourism infrastructure, distance (or transportation costs), common border and language are also found to affect arrivals. The results also indicate the need to conduct estimation by regional groupings for a better understanding of different markets.

Factors Affecting International Tourism Flows to Turkey: A Gravity Model Approach

A gravity-based modelling effort is undertaken to analyse the factors affecting the numbers of international tourists visiting Turkey from the top 11 originating countries for 1995–2005. It is found that an eight-factor model (GDP per capita, tourism climate index, population of the originating country, tourism price index, distance, earthquake, neighbouring country, September 11 terrorist attacks) can explain most of the data. The usual negative distance effect and the tourism climate index are found to be the most important indicators of the magnitude of tourism flows. An unexpected finding, however, is the relative insignificance of the Iraq War dummy.

Global Financial/Economic Crisis and Tourist Arrival Forecasts for Hong Kong

This paper examines the impact of the global financial/economic crisis on the demand for Hong Kong tourism by residents of 10 major source markets for the period 2009–2012. To capture the influence of this crisis, the Autoregressive Distributed Lag Model (ADLM) is used to calculate the demand elasticities, and four scenarios (ranging from the most pessimistic to the most optimistic) are created to examine the possible impacts of changes in source market income levels and the price of tourism on the demand for Hong Kong tourism in these markets. The demand elasticities reveal that the economic conditions in the source markets are the most significant determinants of demand for Hong Kong tourism. In the most pessimistic scenario, total tourist arrivals to Hong Kong are projected to reach 27.6 million in 2009 and 26.0 million in 2012, whereas in the most optimistic scenario, these numbers are 30.7 million in 2009 and 33 million in 2012. In all of the scenarios, tourist arrivals from the long-haul markets are expected to suffer more losses relative to the short-haul markets during the 2009–2012 forecasting period. The forecasts also indicate that the market shares of the source markets will change slightly over this period, with Mainland China, Taiwan and Japan constituting the dominant markets for Hong Kong tourism.

Tourism Demand Modelling and Forecasting: How Should Demand Be Measured?

Tourist arrivals and tourist expenditure, in both aggregate and per capita forms, are commonly used measures of tourism demand in empirical research. This study compares these two measures in the context of econometric modelling and the forecasting of tourism demand. The empirical study focuses on demand for Hong Kong tourism by residents of Australia, the UK and the USA. Using the general-to-specific modelling approach, key determinants of tourism demand are identified based on different demand measures. In addition, the forecasting accuracy of these demand measures is examined. It is found that tourist arrivals in Hong Kong are influenced mainly by tourists' income and ‘word-of-mouth’/habit persistence effects, while the tourism price in Hong Kong relative to that of the tourist origin country is the most important determinant of tourist expenditure in Hong Kong. Moreover, the aggregate tourism demand models outperform the per capita models, with aggregate expenditure models being the most accurate. The implications of these findings for tourism decision making are that the choice of demand measure for forecasting models should depend on whether the objective of the decision maker is to maximize tourist arrivals or expenditure (receipts), and also that the models should be specified in aggregate form.

Estimating Price Effects in an Almost Ideal Demand Model of Outbound Thai Tourism to East Asia

This paper analyzes the responsiveness of Thai outbound tourism to East Asian destinations, namely China, Hong Kong, Japan, Taiwan and Korea, to changes in effective relative price of tourism, total real total tourism expenditure, and one-off events. The nonlinear and linear Almost Ideal Demand (AID) models are estimated with monthly data to identify the price competitiveness and interdependencies of tourism demand for competing destinations in both long run (static) and short run error correction (dynamic) specifications. The homogeneity and symmetry restricted long run and short run AID models are estimated to calculate elasticities. The income elasticities, and the compensated and uncompensated own-price and cross-price elasticities, provide useful information for public and private tourism agents at the various destinations to maintain and improve price competitiveness. The empirical results show that price competitiveness is important for tourism demand for Japan, Korea and Hong Kong in the long run, and for Hong Kong and Taiwan in the short run. With regard to long run cross-price elasticities, the substitution effect can be found in the following pairs of destinations: China-Korea, Japan-Hong Kong, Taiwan-Hong Kong, Japan-Korea, and Taiwan-Korea. In addition to the substitution effect, the complementary effect can be found in the following pairs of destinations: China-Hong Kong, China-Japan, China-Taiwan, Japan-Taiwan, and Korea-Hong Kong. Contrary to the findings obtained from the long run AID specification, Japan-Korea and Taiwan-Korea are complements in the short run. Furthermore, the real total tourism expenditure elasticities indicate that China’s share of real total tourism expenditure is inelastic in response to a change in real total tourism expenditure, while Korea’s share of real total tourism expenditure is most sensitive to changes in expenditure in the long run. The greatest impact on the share of real total tourism expenditure in the short run is tourism demand for Taiwan.