Research Note:Estimating Price and Income Demand Elasticities for Spain Separately by the Major Source Markets

Abstract

The main goal of this study is to estimate the price and income elasticity of demand for tourism to Spain. This estimation is done separately for the major international source markets for Spain: Germany, the UK, Italy and the Netherlands. For this purpose, the authors use the autoregressive distributed lag (ARDL) approach to cointegration and the bootstrap method to construct empirical confidence intervals for each estimate. The results reveal that the tourism demand in all the countries studied has a similar income elasticity, which is approximately unitary. However, there is an important difference with regard to price elasticity: tourism demand from the UK is statistically price inelastic, but demand is elastic for the remaining countries. This finding is relevant because, first, it underlines the importance of studying the source markets separately instead of analysing an aggregate international tourism demand, and, second, it supports the need to implement different tourism policies and strategies with respect to the pricing decisions for each source market.

La modelización de la demanda de turismo de economías emergentes: el caso de la llegada de turistas rusos a España

“…13 Esta afirmación fue hecha por Crouch (1989) en base a su propia experiencia. No obstante, los últimos estudios sobre la demanda de turismo internacional a España parece reflejar que el turismo ha dejado de considerarse un bien de lujo para muchas nacionalidades (Kulendran y Witt, 2001;Álvarez-Díaz et al, 2015a;Álvarez-Díaz et al, 2015b) La estimación del parámetro de la variable P (β 4 ) revela que la elasticidad precio de la demanda de turismo ruso a España es aproximadamente de 3,84. Es decir, un aumento de un 1 por ciento en el nivel del coste relativo de la vida en España originaría una disminución del 3,84 por ciento de la demanda.…”

“…A pesar del notable peso del turismo internacional en la economía española y el gran interés que muestran muchos agentes económicos en reducir la incertidumbre inherente a la actividad turística, existe una incomprensible escasez de estudios que determinen los factores explicativos más importantes y sus impactos sobre la demanda internacional de turismo a España Álvarez-Díaz et al, 2015a). En este sentido cabe destacar el trabajo de González y Moral (1995) en el que se explica la demanda de turismo internacional a España, aproximado por el gasto total de turismo, en función de unos índices de precios y de renta de los diferentes países emisores de turismo a España.…”

The income elasticity gap and its implications for economic growth and tourism development: the Balearic vs the Canary Islands

“…Knowing the income elasticity of the origin markets allows local authorities to prepare and react to a foreseeable major drop in inbound flows in the event of an economic recession (Dougan, 2007;Lim, Min & McAleer, 2008;Saayman & Saayman, 2015;Smeral, 2009). The second application relates to destination marketing: the calculation of market-specific income elasticities aids in market segmentation (Álvarez-Díaz, González-Gómez & Otero-Giráldez, 2015;Lin, Liu & Song, 2015;Fredman & Wikström, 2018). It has been well-established that income elasticities change across origin countries (Jensen, 1998;Smeral, 2003;Smeral, 2014) as they are sensitive to income levels and business cycles.…”

European outbound tourism in times of economic stagnation

“…In line with the latter study, Alvarez-Diaz et al (2015) argued that, in many studies, elasticity estimations are of limited utility for designing policies and strategies because they do not provide a confidence interval associated with the estimation. Considering this lack of information, Alvarez-Diaz et al (2015) also construct confidence intervals for the elasticity estimates using the bootstrap method. Natural logarithms were taken of all variables before they were used for estimation in order to ensure a linear relationship between the variables.…”

“…Similarly, Song et al () demonstrate that point estimation of elasticities contains too little information and therefore apply a bias‐corrected bootstrap method. In line with the latter study, Alvarez‐Diaz et al () argued that, in many studies, elasticity estimations are of limited utility for designing policies and strategies because they do not provide a confidence interval associated with the estimation. Considering this lack of information, Alvarez‐Diaz et al () also construct confidence intervals for the elasticity estimates using the bootstrap method.…”