Tourism Price Research Articles

A Bound Test Approach to Cointegration of Tourism Demand

Problem statement: Given the high contribution of tourism industry in the Malaysian economy, Malaysia has a vast view to increase its market share of the international tourist arrivals in the Asia Pacific region. Therefore, this study attempts to investigate the long run and short run demand for tourism from top ten markets (country). Approach: To accomplish this objective the ARDL bound test approach to cointegration was carried out for quarterly time series data from 1998:Q1 to 2007: Q3. A three-stage procedure followed to test the direction of causality. In the first stage the order of integration was tested using the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root tests. The second stage involved testing for the existence of a long-run equilibrium relationship between arrivals, income, tourism price, tourism substitute price and travel cost. The third stage involved constructing standard Granger-type causality tests augmented with a lagged error-correction term where the series were cointegrated. Results: The result of ADF and PP unit root tests confirmed that all variables were stationary at first difference. In addition the results indicated that a long run relationship and between variables. Conclusion: The results indicated that tourists from these ten countries seem to be highly sensitive to the price and the alternative destinations are complementary to Malaysia. In addition the results showed that the outbreak of Severe Acute Respiratory Syndrome (SARS, 2003) had a negative affects significantly affected Malaysia’s tourism demand.

A Dynamic Panel Data Study of the German Demand for Tourism in South Tyrol

Germany is traditionally the most important source of tourism for South Tyrol. The purpose of this study is to investigate the determinants of the German demand for tourism in this Italian region. We introduce a dynamic panel data model for modelling short and long-term responses. We use annual data from 1987 to 2007 of the per capita GDP of Germany (measuring income), the number of German tourists in each of the 116 tourism destinations of South Tyrol (measuring the volume of tourism), the relative prices between Italy and Germany (measuring tourism price) and price of crude oil (as a proxy of travel costs). The main results of this study are: (1) the demand for tourism in the previous period has a positive and relevant effect on actual demand, reflecting loyalty of the German tourists; (2) the cost of travel and the relative prices have a negative and significant impact on tourism demand.

The Determinants of Tourism Demand in South Africa Using a Dynamic Panel Data Approach

This article models inbound tourism demand for South Africa using a theoretical framework that is based on the gravity model and provides elasticity estimates that are useful for policy purposes. It uses a well-established gravity model following Anderson and van Wincoop's model (2003) to explain tourism flows. The article departs from most of the existing work estimating tourism demand and builds on the recent work of Durbarry, but employs a dynamic panel data setting. The results show that tourists are not too sensitive to changes in the tourism price of South Africa, indicating that it offers a unique product and experience to tourists. In fact, evidence tends to suggest that competing destinations may imploy tourism products that are unique to their destinations in the region. The level of development and tourism infrastructure also affect arrivals. It is also found that distance negatively affects arrivals, but common border and language play an important role. The dynamic model supports the presence of repeat tourism and positive word-of-mouth, particularly from European and American origins.

Dynamic programming of capacity expansion for reverse osmosis desalination plant: Sharm El Sheikh, Egypt

With a reverse osmosis (RO) desalination plant designed to satisfy only the contracted-for water supply, the water company would be missing out on potential benefits that could have been obtained selling water in periods of high demand. On the other hand, sizing the RO desalination plant to produce water to satisfy peak demand means incurring additional costs as well as having the plant partially idle during periods of average or low demand. A model was developed using Excel macros to perform dynamic programming to optimize the capacity expansion of an RO desalination plant. The objective function is to maximize the present value of the total net benefits over the lifetime of the RO desalination plant. The model can be used to test different scenarios to capture time-variant tourism demand and price uncertainties on investment decisions. This study focuses on tourism dominated arid coastal regions, using Sharm El Sheikh (Sharm) in South Sinai, Egypt, as an example.19 RO plants in Sharm were surveyed and data were collected including unit production costs, O&M costs, energy consumption rates, contracted-for water supply, and utilization. Unit production cost of an RO desalination plant varies according to the degree of operation of the plant. This fact has to be taken into consideration when calculating the costs of RO desalination and when deciding on the plant capacity in order to maximize the total net benefit. Using the collected data, cost functions were developed for O&M costs as a function of utilization and plant capacity. The cost model calculated similar values to the actual total net benefit for one of the surveyed RO plant taken as an example. Using the optimization model, the maximum total net benefit is obtained with a smaller installed capacity than the actual case. A modified pricing structure is suggested in the paper that ties the water selling price to consumption in an effort to reduce demand in excess of contracted-for water supply aiding the water company to fulfill its contractual commitments to all users. However, price elasticity has to be taken into consideration to determine the impact of price change on water demand.

What Actions Could Boost International Tourism Demand for Tanzania?

Tanzania recognises the potential of international tourism in accelerating socio-economic development, particularly as a supplier of foreign exchange, investment and employment. This paper investigates the factors affecting international tourism demand for Tanzania. The autoregressive distributed lag approach to cointegration is applied. Local tourism prices, tourist addiction, tourist income and the 2001 terror attack in the United States have significant impacts on international tourism demand for Tanzania between 1996 and 2006. The government needs to maintain macroeconomic stability, especially low inflation, if the country is to reap full economic benefits from tourism. To reduce sensitivity to local tourism prices, the tourism providers should put more efforts in diversifying tourism products away from the universally available ones. There is also a need to improve customer satisfaction to enhance tourist addiction for the Tanzanian experience. In this regard, there is a need to further train staff in the tourism industry, improve tourism infrastructure such as roads and hotels and aggressively market Tanzanian tourism products to the world.

Asian Tourism Demand For Malaysia: A Bound Test Approach

ABSTRACT The objective of this paper is to investigate the long-run and short-run relationships among tourist arrivals to Malaysia and tourism price, substitute price, travelling cost, income and exchange rate for Asian7. The autoregressive distributed lag (ARDL) bounds test approach developed by Pesaran et al. (2001) is employed in the analysis, and the data cover the period 1970 to 2004. The empirical results show that in the long-run and short-run the tourism price, travelling cost, substitute price and income are the major determinants of Malaysia's tourism demand. The results also show that word-of mouth effect, world economic crisis (1997-98) and the outbreak of SARS (2002-03) significantly affected the demand for Malaysia's tourism in the short-run. The findings are consistent with the economic theory and the model passed all the diagnostic tests. Keywords: Tourism Demand, Cointegration, ARDL Model, Bounds Test, Asian7

Community-based ecotourism in Bhutan: Expert evaluation of stakeholder-based scenarios

We present a case study of Jigme Dorji National Park in Bhutan and investigate various scenarios pertaining to tourism. The Formative Scenario Analysis procedure was used to generate different stakeholder-based scenarios. The scenarios differed with respect to tourism infrastructure, degree of nature conservation, cultural preservation and participation of local communities in the tourist industry. The weighing of criteria and multicriteria evaluations of scenarios by Bhutanese and non-Bhutanese expert groups were compared. These comparisons and comparisons between subgroups revealed conflicting preferences of tourism promotion goals among experts. Every expert suggested promoting community-based ecotourism in the national park if tourism is unavoidable. Factors that influence this include tourism pricing policy, accessibility and tourism products. The divergency in expert groups' evaluations suggests that the social conflict and loss of cultural values associated with income from tourism deserves special attention. Tourism development strategies in developing countries must balance conservation of nature and cultural heritage with modernisation and economic development.

Tourism Taxes: Implications for Tourism Demand in the UK

AbstractBefore one can understand tax implications for the tourism industry, one must understand the sensitivity of tourism demand. Using a recently developed theoretical framework, we model inbound tourism demand in the UK. The results suggest that tourism demand in the UK is very price sensitive and that measures which result in increasing tourism prices will have a significant negative impact on tourist arrivals. It is believed that a reduction in the VAT rate could boost UK's tourism sector, depending on the extent to which a decrease in taxation is passed on in the form of price reductions. The results also suggest that arrivals from neighboring countries are 98% higher than from distant origins; however, expenditure per capita of the former is 52% lower than the latter. We also found that common language between the origin and the destination increases arrivals 7% more than non‐native English‐speaking origins.

Environmental policy and long-term welfare in a tourism economy

A dynamic general equilibrium model of a small open economy specialized in producing tourism services is presented. The tourism package is a bundle of attributes provided by firms, the government and the natural environment. Investment in accommodation increases the number of visitors but also congests public goods and reduces environmental quality. The model is used to determine the conditions for the existence of a long-term double dividend. These conditions depend on both the initial level of environmental quality and the responsiveness of the tourism price to marginal changes in environmental and accommodation quality and congestion of public goods.

Determinants of Outbound Holiday Travel for Barbados

Over the years in Barbados, the focus of tourism research has been on inbound tourism. No previous study appears to have addressed the issue of outbound holiday travel by Barbadians. Like inbound holiday travel, outbound holiday travel is seen as a form of relaxation. In addition, it allows Barbadians to visit family and friends that they may not have seen for decades, to witness cultural events, and to purchase goods that are cheaper than at home or that may not be available in the home country. Outbound holiday travel by Barbadians helps to maintain and increase employment in businesses such as travel agencies and airline companies, thereby helping to boost government's tax intake and fiscal position. The article reviews some literature on the subject matter, looks at trends in outbound holiday travel by Barbadians, and, using the Engle Granger two-step method, attempts to identify variables that will impact on this dependent variable over the long and short run. The results show that real per capita income, the real exchange rate, the price of tourism, and personal commercial bank credit affect outbound holiday travel in the long run while all the above-mentioned explanatory variables with the exception of personal commercial bank credit impact upon outbound holiday travel in the short term.

Testing Alternative Dynamic Systems for Modelling Tourism Demand

This paper presents an empirical study of tourism demand dynamics and identifies areas in which the scrutiny of relationships between theoretical and empirical considerations is likely to produce new insights. A flexible general form of a Dynamic Almost Ideal Demand System (DAIDS) is derived to analyse UK tourism demand for the neighbouring destinations of Portugal, Spain and France during 1969–97. Nested within the general dynamic structure are Deaton and Muellbauer's static AIDS model itself, the partial adjustment model and the auto-regressive distributed lag model, which are tested against the general dynamic alternative. The empirical results obtained show that DAIDS is a data-coherent and theoretically consistent model, providing evidence of the robustness of this methodology for tourism demand analysis in a temporal context. Moreover, the dynamic model offers statistically strong evidence of the inadequacy of the orthodox static AIDS and other restricted models for the consistent reconciliation of data and theory within their formulations. Estimates for tourism price and expenditure elasticities are obtained, permitting a comparative analysis of the relative magnitudes and statistical relevance of the long-run and short-run sensitivity of UK tourism demand to changes in its determinants.

An Evaluation of Price Measures in Tourism Demand Models

In contrast with the rapid development of forecast modeling in tourism, there has been little attention given to identifying the best measures of important explanatory variables. This article focused on selecting the best surrogate of tourism price from two measures considered important determinants in modeling tourism demand: the exchange rate-adjusted consumer price index ratio of origin and destination countries, and the divided variables of exchange rate and relative consumer price indexes. Two different models using these measures of tourism prices were compared in terms of their forecasting performance using the Johansen multivariate cointegration approach. We used aggregate data on international tourism demand in Korea. Test results, including forecasting performance and forecast error decompositions, were not clear cut but indicated that the divided measures of tourism prices variables with exchange rate and relative consumer price index are likely best for tourism demand modeling.

Modelling US tourism demand for European destinations

An almost ideal demand system model is used to examine US demand for tourism in European destinations. The model provides policy makers with useful information concerning the sensitivity of tourism demand to changes in relative prices, exchange rates and expenditure. The results show that price competitiveness is important for US demand for France, Italy and Spain but is relatively unimportant for the UK. France and Italy are regarded as substitutes by US tourists, as are Spain and Italy. As US expenditure rises, the market shares of Spain and the UK decline, while France and Italy benefit. The demand modelling and forecasting indicate that in the absence of a tourism price index, the choice between alternative price indices does not have a significant effect on the results.

International Tourism Marketing in Africa

Price of tourism is one of the major determinants of demand for international tourism. This paper assessed the relative price competitiveness of African countries in the international tourism market. It used a measure of price assessment that is based on the purchasing power parities of the ICP to ensure adequate comparability. Ethiopia, Malawi, and Zimbabwe were found to be the most price competitive; while the least price competitive countries proved to be Botswana, Tanzania, and Egypt. Changes in price competitiveness between 1985 and 2000 were analyzed according to sources of such changes. Policy and managerial implications of findings are discussed, and directions for future research are given.

Applicability of Smeral's Model in Explaining Tourism Share of Member States in SAARC Region

This paper attempts, with help of Smeral Model, to study the determinants of demand share of individual member states in total SAARC arrivals from seven major tourism markets. Empirical study of the tourism with the help of modified version of this model demonstrates the interdependency among the SAARC countries. This study found that relative price and regional share are two important link factors for the individual states in the region. Individual share of the tourism increases with an increase in regional share in the world tourism and with a decrease in relative price of tourism and vice-versa.

Market shares analysis: The Case of French Tourism Demand

This paper examines the magnitudes and determinants of changes in destinations’ shares of a major tourist origin market. The Almost Ideal Demand System model is used to quantify the responsiveness of French tourism demand in Italy, Spain, and the United Kingdom to changes in relative prices, exchange rates, tourists’ expenditure budget, and external events. The results indicate that effective price competitiveness is a key variable driving changes in market shares. Policymakers who wish to maintain their shares of the French market should pay particular attention to tourism pricing policies, as well as to improving the tourism offer.

Modelling International Travel Demand from Singapore to Australia

ABSTRACT Prior to the recent Asian currency and economic crises, tourism from Asia had rapidly become Australia's major tourism export industry. Tourists from Singapore, which is Australia's fifth major market, represented 6% of international tourist arrivals to Australia in 1996. The average annual growth rate of tourist arrivals from Singapore of around 20% over 1990–96 far exceeded the 10.5% average annual percentage growth rate of all tourist arrivals to Australia over the same period (Australian Bureau of Statistics 1997). Despite the Asian currency and economic crises in 1997–98, tourist arrivals to Australia from Singapore have continued to grow slowly. It is imperative to consider the economic factors influencing international tourism demand for Australia by Singapore, and to undertake a sensitivity analysis of tourist arrivals to changes in the factors. The purpose of the paper is to estimate the income, price and transportation cost elasticities of inbound tourism from Singapore to Australia using seasonally unadjusted quarterly data. Initially, estimation is undertaken using ordinary least squares. Given New Zealand's proximity to Australia, it is also useful to determine using a single-equation model if Australia and New Zealand are substitute or complementary destinations for Singaporean tourists by examining the effects of the relative price changes in New Zealand and Australia on international travel demand for Australia. In addition, seasonal influences are examined using the single-equation model. The OLS estimates of the appropriate single-equation model are also compared with the estimates obtained using the cointegration method in Lim and McAleer (2001).

Destination Price Competitiveness: Exchange Rate Changes versus Domestic Inflation

The price competitiveness of tourism is an important determinant of inbound visitor numbers. Price competitiveness indices can be used to explore questions of how a destination changes in this respect over time and the causes of any changes. A method of constructing tourism price competitiveness indices is outlined here. The method allows the various determinants of tourism price competitiveness, such as exchange rate and price changes, to be highlighted and their influence on the indices to be identified. The method also allows for comparison of a destination’s tourism price competitiveness relative to domestic tourism in origin markets and for its overall price competitiveness relative to major competitors. Results are presented for 19 tourism destinations during the period from 1985 to 1998 using Australia as a base case.

International price competitiveness of Australia's MICE industry

AbstractA special‐interest tourist market that holds out great promise for continued growth well into the next century is that of MICE (meetings, incentives, conventions, exhibitions). At the same time, changing prices in particular destinations relative to others are regarded as one of the most important economic influences on destination shares of total international tourism flows. The question arises as to the price competitiveness of major competing MICE destinations. Although earlier research has recognised that a destination's price competitiveness differs according to a visitor's country of origin there has been relatively little attention paid to tourism price competitiveness from the perspective of those having different motives for travel. This paper has four major aims: first, to provide a method by which price competitiveness of tourism by journey purpose can be estimated; second, to construct price competitiveness indices that measure, absolutely and relative to major competitors world‐wide, the price competitiveness of Australia's MICE tourism industry; third, to compare Australia's price competitiveness as a MICE destination with its price competitiveness for total inbound tourism; fourth, to discuss the implications of the results for travel and tourism decision‐makers in both the private and public sectors. Copyright © 2001 John Wiley & Sons, Ltd.

A Meta-Analytic Review of International Tourism Demand

The purpose of this article is to review a large number of published empirical studies on modeling international tourism demand and to integrate their findings according to the important explanatory variables used (income, transportation costs, and tourism prices), the proportion of significant findings, and the effect sizes of these major explanatory variables. A meta-analysis of 70 articles is provided, the articles being selected on the basis of their t-statistics, standard errors, F -statistics, and sample sizes. The primary purpose of the meta-analysis is to enable general conclusions to be drawn from the major published empirical studies regarding the relationships between international tourism demand and income, transportation costs, and tourism prices.