Measuring price elasticities of demand for outbound tourism using competitiveness indices

Neelu Seetaram; Peter Forsyth; Larry Dwyer

doi:10.1016/j.annals.2015.10.004

Measuring price elasticities of demand for outbound tourism using competitiveness indices

Neelu Seetaram, Peter Forsyth, Larry Dwyer

Department of Economics

Research output: Contribution to journal › Article › Research › peer-review

77 Citations (Scopus)

Abstract

The real exchange rate (REX) has long been used as the proxy for prices in tourism demand models. However it has limitations, particularly when it comes to models of outbound tourism. As an alternative, a price competitiveness index (PCI) is developed and used as a proxy for prices in a model of outbound tourism from Australia. Results obtained show that while REX is statistically insignificant and yields a price elasticity of -0.002, PCI is significant and generates a price elasticity of -1.07. The results obtained show that PCI outperforms REX as the preferred price variable in modelling outbound demand on both theoretic and empirical grounds. Furthermore, this index can be used to monitor the inter-temporal competitiveness of a destination.

Original language	English
Pages (from-to)	65-79
Number of pages	15
Journal	Annals of Tourism Research
Volume	56
DOIs	https://doi.org/10.1016/j.annals.2015.10.004
Publication status	Published - 1 Jan 2016

Keywords

Australia
Dynamic panel data
Outbound tourism
Price competitiveness index
Price elasticity

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10.1016/j.annals.2015.10.004

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abstract = "The real exchange rate (REX) has long been used as the proxy for prices in tourism demand models. However it has limitations, particularly when it comes to models of outbound tourism. As an alternative, a price competitiveness index (PCI) is developed and used as a proxy for prices in a model of outbound tourism from Australia. Results obtained show that while REX is statistically insignificant and yields a price elasticity of -0.002, PCI is significant and generates a price elasticity of -1.07. The results obtained show that PCI outperforms REX as the preferred price variable in modelling outbound demand on both theoretic and empirical grounds. Furthermore, this index can be used to monitor the inter-temporal competitiveness of a destination.",

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N2 - The real exchange rate (REX) has long been used as the proxy for prices in tourism demand models. However it has limitations, particularly when it comes to models of outbound tourism. As an alternative, a price competitiveness index (PCI) is developed and used as a proxy for prices in a model of outbound tourism from Australia. Results obtained show that while REX is statistically insignificant and yields a price elasticity of -0.002, PCI is significant and generates a price elasticity of -1.07. The results obtained show that PCI outperforms REX as the preferred price variable in modelling outbound demand on both theoretic and empirical grounds. Furthermore, this index can be used to monitor the inter-temporal competitiveness of a destination.

AB - The real exchange rate (REX) has long been used as the proxy for prices in tourism demand models. However it has limitations, particularly when it comes to models of outbound tourism. As an alternative, a price competitiveness index (PCI) is developed and used as a proxy for prices in a model of outbound tourism from Australia. Results obtained show that while REX is statistically insignificant and yields a price elasticity of -0.002, PCI is significant and generates a price elasticity of -1.07. The results obtained show that PCI outperforms REX as the preferred price variable in modelling outbound demand on both theoretic and empirical grounds. Furthermore, this index can be used to monitor the inter-temporal competitiveness of a destination.

KW - Australia

KW - Dynamic panel data

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KW - Price elasticity

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Measuring price elasticities of demand for outbound tourism using competitiveness indices

Abstract

Keywords

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