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

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

75 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
Early online date	7 Dec 2015
DOIs	https://doi.org/10.1016/j.annals.2015.10.004
Publication status	Published - 1 Jan 2016
Externally published	Yes

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10.1016/j.annals.2015.10.004

Measuring Elasticities using Competitiveness IndicesAccepted author manuscript, 407 KBLicence: CC BY-NC-ND

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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

KW - Outbound tourism

KW - Price competitiveness index

KW - Price elasticity

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JO - Annals of Tourism Research

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Measuring price elasticities of demand for outbound tourism using competitiveness indices

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