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The Economics of Tourism Destinations

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The Economics of Tourism Destinations

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Abstract

The tourism destination, intended as the location of tourism structures and services as well as the place where travelers’ needs are fulfilled, is the core of the tourism system. Usually, a destination is geographically well defined, but its boundaries may often blur and evolve. According to Davidson and Maitland (1997):

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Notes

  1. 1.

    Throughout the chapter, we will use N, the number of overnight stays, as the relevant variable to identify the “quantity” of tourism demanded by tourists while, for simplicity, we will sometimes refer to as days, but the underlying assumption is that days have always to be considered as the number of nights spent at the destination. We will use v, as the unit price, that is, the price of one day of tourism.

  2. 2.

    This hypothesis will be maintained throughout the chapter, and is made to simplify the economic problem of the destination by reducing case sub (3) into case sub (1).

  3. 3.

    With reference to the graphical sketching of the demand function in the plane (N; v), we define as a movement along the curve any change of the quantity demanded N stemming from the change in price v, ceteris paribus. Instead, we define as movement of the curve any change in the quantity demanded N stemming from the change in relevant variables other than price (such as income, price of other goods, etc).

  4. 4.

    See Sect. 5.3 for a detailed discussion of the demand for tourism as a function of the money available for holidays.

  5. 5.

    If the tourist allocates a constant share of his budget to each tourism activity, it is possible to replace available money with disposable income in the formulas of elasticity. However, this is rarely true, and it is better to keep the two aspects separated (see Sect. 4.2.2.4).

  6. 6.

    Michelman (1982), Heller (1998, 1999). For an introduction to the topic, see Parisi et al. (2000, 2004).

  7. 7.

    We remind that the assumption of null production costs implies the equivalence between profits and revenues. In this way, the assumption of profit maximization is coherent with the real-world goal of revenue maximization of the destination, that is, in other words, maximization of tourism expenditure.

  8. 8.

    The issue of a fragmented supply in the destination is similar to the issue of double intermediation, which is typical for firms operating at different levels of the distribution chain. For an application of this problem to both hotels and airlines, see Wachsman (2006). For an application to the relationship between tour operators and travel agencies, see Sect. 11.5.2.

  9. 9.

    The discussion of this type of contract (free sale contract) will be presented in Chap. 11 (see also Castellani and Mussoni 2007).

  10. 10.

    The elasticity of substitution measures how easy is to substitute one good with the other in order to maintain the same level of utility: it is computed as the ratio of two goods to a utility function with respect to the ratio of their marginal utilities. The CES is a family of functions U = (x a + y a)1/a that has constant (but generally different from one) elasticity of substitution. The Cobb-Douglas (CD) utility function, U = x a y b, which exhibits a constant and unitary elasticity of substitution is then a special case of the more general CES utility function.

  11. 11.

    For an extension that integrates the theorems of Coordination and of Love for Variety into a unified model, see Andergassen et al. (2012).

  12. 12.

    Since tourism expenditure is proportionally related to overnight stays (and to arrivals), and being the data on the former generally less available than the latter, the working goal of the destination usually becomes the maximization of overnight stays or arrivals. Some authors, however, disagree on the adoption of tourism expenditure as a target. For a critical discussion of this topic, see Dwyer and Forsyth (2008).

  13. 13.

    From now on, we will simplify our formal exposition by omitting the subscripts for the type of tourism i and for the destination r. However, it is still intended that we refer to a particular type of tourism and a given destination.

  14. 14.

    In a more general model, the relevant variables in the determination of the holidays length should be classified as either socio-demographic variables (for example, the composition of the tourist’s family), economic variables (the price of the holiday relative to other destinations or to the level of income), or market variables (when the holidays is a package tour, its duration is usually predetermined by the tour operator). For a discussion of this topic, see Alegre and Pou (2006), Alegre et al. (2011) and Pestana Barros and Pinto Machado (2010).

  15. 15.

    In the economic literature, the analysis of these effects in a general perspective dates back to Leibenstein (1950).

  16. 16.

    For an introduction to the TALC model we refer to Cooper (1990) or to Shaw and Williams (2004) and Butler (2006) for a more recent discussion on the link between sustainability and the TALC. See also Swann (2010) for an interesting extension of the model to take into account the effect of cycles or waves in demand.

  17. 17.

    We will discuss the segmentation of the tourism market in Sect. 6.7.5, while the psychological and sociological determinants of the demand will be briefly referred to in Sect. 6.6.

  18. 18.

    The effects on tourism demand stemming from the exchange rate, the relative price and income are estimated in terms of elasticity (see Sect. 4.2.2). See Stabler et al. (2010, p. 50–55).

  19. 19.

    The price of transport as a determinant of tourism demand should be treated with care and be the subject of far more theoretical and empirical investigation than has been the case to date. (Stabler et al. 2010, p. 58).

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  1. Department of Economics, University of Bologna, Bologna, Italy

    Guido Candela & Paolo Figini

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Candela, G., Figini, P. (2012). The Economics of Tourism Destinations. In: The Economics of Tourism Destinations. Springer Texts in Business and Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-20874-4_4

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