The impact of relative prices on tourism demand for Mauritius: An empirical analysis
Mauritius - 30 May 2018
The present study assesses the impact of relative prices on tourism ﬂows in Mauritius. To account for dynamism in tourism ﬂows modelling, a dynamic time series analysis – namely the vector autoregressive model – is employed. The results show that relative price measures have a longrun impact on international tourism ﬂows, indicating that tourists are sensitive to price levels. The relative average cost in the different competing destinations is also reported to be positive and signiﬁcant, indicating that the impact of relative price changes in foreign destinations competing with Mauritius tourism matters; thus indicating a certain degree of substitutability between Mauritian and its regional competitors’ tourism. Tourism infrastructure, income in country of origin and the island’s level of development are conﬁrmed to be key factors in the tourist selection decision. Finally, overall, short-run estimates conﬁrm the above results.
Keywords: relative prices; tourism demand; vector autoregressive model; demand elasticit