Developing a Price Competitiveness Index to Calculate Price Elasticity of Demand for Outbound Tourism in Australia

Neelu Seetaram, Peter Forsyth, Larry Dwyer

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

REX is the most commonly used proxy for prices in tourism demand models. Empirically, however, the REX has often failed to perform satisfactorily as a proxy for prices.Using a fairly large sample of 47 countries over 18 years, this paper develops an alternative proxy for prices in the form of a price competitiveness index using published GDP per capita PPP data from the World Bank. The advantage of this price proxy is that, it can be used to monitor the inter-temporal competitiveness of a destination. A model of outbound tourism is developed using the dynamic panel data technique. The estimation results show that while real exchange rate is statistically insignificant and yields a price elasticity of -0.004, the competitiveness index is significant and generates a price elasticity of -0.913. In both theory and practice, the index developed in this paper clearly outperforms real exchange rates as the preferred price variable in modelling outbound demand.
Original languageEnglish
Title of host publicationCAUTHE 2014 Tourism and Hospitality in the Contemporary World
Subtitle of host publicationTrends, Changes and Complexity
Pages1100-1104
Number of pages5
Publication statusPublished - 2014
Externally publishedYes
EventThe Council for Australasian Tourism and Hospitality Education: Tourism and Hospitality in the Contemporary World: Trends, Changes and Complexity - The University of Queensland, Brisbane, Australia
Duration: 10 Feb 201413 Feb 2014
http://cauthe.org/services/conferences/conference-2014/ (Link to Conference Details)

Conference

ConferenceThe Council for Australasian Tourism and Hospitality Education
Abbreviated titleCAUTHE 2014
CountryAustralia
CityBrisbane
Period10/02/1413/02/14
Internet address

    Fingerprint

Cite this

Seetaram, N., Forsyth, P., & Dwyer, L. (2014). Developing a Price Competitiveness Index to Calculate Price Elasticity of Demand for Outbound Tourism in Australia. In CAUTHE 2014 Tourism and Hospitality in the Contemporary World: Trends, Changes and Complexity (pp. 1100-1104)