The Price Tag of Tourism: Does Tourism Activity Increase the Prices of Goods and Services?

Abstract

The authors use panel data models on a dataset covering EU new member states and candidate countries (Montenegro and Turkey) to investigate the relationship between tourism activity and price level. Along with modelling the overall price level, the authors also separately model the price level of consumer goods, of consumer services and of goods and services associated with tourism consumption (hotels and restaurants, recreation and culture, transportation and food and beverages). Thereby, they control for other factors that commonly influence the price level of an economy, such as income, productivity, trade openness and fiscal dominance. The results suggest that tourism activity increases the overall price level in the economy. This effect is, however, much stronger for prices of consumer services; in particular, for prices of recreation and culture, and hotels and restaurants.

Changes on the tourism services market in Montenegro in 2007–2017

“…All of the above mentioned factors influence the development of tourism. On the other hand, tourism influences the factors that facilitate its growth (Tkalec, Vizek, 2016).…”

Fuel prices at petrol stations in touristic cities

“…An alternative and complementary approach is to collect data on the actual prices for various goods and services, from different locations and/or at different points of time, and to use this information to empirically estimate the effect of tourism on such prices. Espinet et al (2011), Campos et al (2013), and Tkalec and Vizek (2016) follow this approach. While Espinet et al (2011) do not find significant differences in price levels between tourism and nontourism jurisdictions, Campos et al (2013) and Tkalec and Vizek (2016) provide evidence of higher prices in areas where tourism plays a significant role in the economy and especially in those sectors that are closely associated with tourism.…”

“…Espinet et al (2011), Campos et al (2013), and Tkalec and Vizek (2016) follow this approach. While Espinet et al (2011) do not find significant differences in price levels between tourism and nontourism jurisdictions, Campos et al (2013) and Tkalec and Vizek (2016) provide evidence of higher prices in areas where tourism plays a significant role in the economy and especially in those sectors that are closely associated with tourism. However, none of these authors have analyzed the economic impact of tourism on retail fuel prices.…”

The contribution of tourism to the Croatian Economy

“…Payne & Mervar, 2010) and the contrary hypothesis that tourism does not necessarily increase a country's competitiveness or its economic welfare (e.g. Tkalec & Vizek, 2016) are among the main topics. Also, much of the research has been directed toward understanding inter-sectoral linkages and the assessment of the economic impact of tourism based on statistical and model approaches (Song, Dwyer, Li & Cao, 2012).…”