Measuring price elasticities of demand for outbound tourism using competitiveness indices

Neelu Seetaram, Peter Forsyth and Larry Dwyer

Annals of Tourism Research, 2016, vol. 56, issue C, 65-79

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.

Keywords: Price competitiveness index; Outbound tourism; Dynamic panel data; Price elasticity; Australia (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:anture:v:56:y:2016:i:c:p:65-79

DOI: 10.1016/j.annals.2015.10.004

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