nep-tur New Economics Papers
on Tourism Economics
Issue of 2006‒04‒08
eight papers chosen by
Antonello Scorcu
Universita di Bologna

  1. Managing Value-at-Risk in Daily Tourist Tax Revenues for the Maldives By Michael McAleer; Riaz Shareef; Bernardo da Veiga
  2. International Tourism, development and Biodiversity: First Evidence By Andreas Freytag; Christoph Vietze
  3. An Analysis of the Microeconomic Determinants of Travel Frequency By Joaquín Alegre; Llorenç Pou
  4. Taxing Tourism in Spain: Results and Recommendations By Alberto Gago; Xavier Labandeira; Fidel Picos; Miguel Rodríguez
  5. El paquete turístico de todo incluido: un análisis de sus implicaciones económicas para el caso de las Islas Baleares By Joaquín Alegre; Llorenç Pou
  6. A Revealed Preference Approach to the Measurement of Congestion in Travel Cost Models By Christopher Timmins; Jennifer Murdock
  7. Modeling Travel Demand in a Metropolitan City: Case Study of Bangalore, India By Pangotra Prem; Sharma Somesh
  8. Can New Orleans Play Its Way Past Katrina? The Role of Professional Sports in the Redevelopment of New Orleans By Victor Matheson; Robert Baade

  1. By: Michael McAleer; Riaz Shareef; Bernardo da Veiga
    Abstract: International tourism is the principal economic activity for Small Island Tourism Economies (SITEs). There is a strongly predictable component of international tourism, specifically the government revenue received from taxes on international tourists, but it is difficult to predict the number of international tourist arrivals, which determines the magnitude of tax revenue receipts. A framework is presented for risk management of daily tourist tax revenues for the Maldives, which is a unique SITE because it relies almost entirely on tourism for its economic and social development. As international tourism receipts are significant financial assets to the economies of SITEs, the timevarying volatility of international tourist arrivals and their growth rate is analogous to the volatility (or dynamic risk) in financial returns. The volatility in the levels and growth rates of daily international tourist arrivals are investigated in the paper. This paper provides a template for the future analysis of earnings from international tourism, particularly tourism taxes for SITEs, discusses the direct and indirect monetary benefits from international tourism, highlights tourism taxes in the Maldives as a development financing phenomenon, and provides a framework for discussing the design and implementation of tourism taxes. Furthermore, it is demonstrated that the analysis developed in this paper can be used by the Maldivian Government in determining monetary and fiscal policy, by creditors to evaluate the risks associated with providing financial support to the Maldives, and by resort operators to decide whether to expand or contract their operations.
    Keywords: Small Island Tourism Economies (SITEs), International tourist arrivals, Tourism tax, Volatility, Risk, Value-at-Risk (VaR), Sustainable Tourism@Risk (ST@R).
    Date: 2005–11
  2. By: Andreas Freytag (University of Jena, Faculty of Economics); Christoph Vietze (University of Jena, Faculty of Economics)
    Abstract: We analyse whether biodiversity can improve the economic growth of Least Developed Countries (LDCs) by increasing the receipts of tourism as one of the world biggest and fastest growing industries. The intention of our examination is to present an alternative utilization of biodiversity, rather than hunting or the agricultural use of habitats. Our hypothesis is that tourism may be an important chance for economic growth in developing countries. We assume that biodiversity is an important factor influencing the demand for tourism. In other words: a rich biodiversity provides a comparative advantage for most LDCs. Using by a simple growth-model, we conclude that only sustainable tourism shows a steady economic growth in the long run, which may result in an economic convergence from LDCs to Developed Countries. <BR> The model is supported by an empirical analysis. We assess the determinants of trade in tourism and comparative advantage therein based on cross-country data of incidence and the rate of endangerment of birds, as the probably best explored taxonomic group. Other exogenous variables are GDP per capita, life expectancy (as determinates for safety and infrastructure), coastline, the distance to the equator and the number of UNESCO-World-Heritage sites. The main findings are that LDCs first seem to have a comparative advantage in (sustainable) tourism, that second incidence of birds has a positive impact on inbound tourism receipts per capita, and that third the rate of endangered to total birds is negatively influencing tourism receipts.
    Keywords: tourism, economic growth, biodiversity conservation
    JEL: F18 Q26
    Date: 2006–02–10
  3. By: Joaquín Alegre; Llorenç Pou
    Abstract: A critical factor in predicting the demand for tourism within a certain period of time is the number of trips individuals take. New tourists’ behaviour shows a tendency toward more frequent travel. Nevertheless, the frequency of travel has received little attention in empirical literature. This paper uses household data to examine the determinants of the number of quarters with positive tourist expenditure within a year. The results highlight the relevance in travel frequency analyses of distinguishing between the participation decision and the frequency decision conditional on participation. Many socio-demographic variables only show explanatory power for the participation decision. The two most relevant factors by far in explaining each decision are the previous year tourism demand decisions (suggesting evidence of habit persistence in tourism decisions) and disposable income, although with an income elasticity below the unit.
    Keywords: Tourism demand, frequency of travel, habit persistence, household data.
    JEL: C25 D12
    Date: 2006–03
  4. By: Alberto Gago; Xavier Labandeira; Fidel Picos; Miguel Rodríguez
    Abstract: This paper analyses the foundations, possible applications and the effects of tourism taxation in Spain. The article begins with an analysis of the economic and environmental reasons for taxing tourism, which would seem to call for taxes based on the principle of benefit, for either revenue or corrective purposes. Subsequently, we describe the praxis of tourism taxation in Spain, with special mention being given to the now repealed Balearic ecotasa. Finally, the effects of two fiscal modifications with revenue or corrective objectives are studied through the use of an applied general equilibrium model developed for the Spanish economy. We thus see that a 10% tax on lodging brings in significant public receipts, increases social welfare and has no effect on the environment. On the other hand, an increase of VAT rates on tourism-related sectors could have the same effects on tourist expenditure but at the costs of greater impact for Spain’s economy.
    Keywords: Tourism demand, frequency of travel, habit persistence, household data.
    JEL: C25 D12
    Date: 2006–03
  5. By: Joaquín Alegre; Llorenç Pou
    Abstract: The percentage of tourists visiting the Balearic Islands that choose the all inclusive package holiday has increased impressively since the turn of the century. The aim of this paper is to analyse the reasons behind this increase, as well as the economic effects that it is causing. For that purpose, several econometric models are estimated with data drawn from the Tourist Expenditure Survey and the brochures of the main tour operators in the Balearics. The main results are the following: (1) it cannot be accepted that the all inclusive product is capturing new segments of demand. (2) The increase in the percentage of tourists that choose the all inclusive product seems to be the result of a price strategy from tour operators. (3) The comparison of mean expenditure among the different types of board shows that the all inclusive option implies an expenditure per tourist per day clearly lower than that from the rest of types of board. (4) The increase of the importance of the all inclusive package is causing a dramatic change in the distribution of tourism receipts among the different economic agents. In fact, the all inclusive package shows levels of revenues paid in origin and in the Balearics highly different from those detected with the other tourist options.
    Keywords: Tourism, all inclusive package, tourist expenditure, tour operators.
    Date: 2006–03
  6. By: Christopher Timmins; Jennifer Murdock
    Abstract: Travel cost models are regularly used to determine the value of recreational sites or particular site characteristics, yet a key site attribute, congestion, is often excluded from such analyses. One of several reasons is that congestion (unlike many other site attributes) is determined in equilibrium by the process of individuals sorting across sites, and thus presents significant endogeneity problems. This paper illustrates this source of endogeneity, describes how previous research has dealt with it by way of stated preference techniques, and describes an instrumental variables approach to address it in a revealed preference context. We demonstrate that failing to address the endogeneity of congestion will likely lead to the understatement of its costs, and possibly to the mistaken recovery of agglomeration benefits. We apply our technique to the valuation of a large recreational fishing site in Wisconsin (Lake Winnebago) which, if eliminated, would induce significant re-sorting of anglers amongst remaining sites. In our application, ignoring congestion leads to an understatement of the lake’s value by more than 50 percent.
    JEL: Q51
  7. By: Pangotra Prem; Sharma Somesh
    Abstract: Increasing urbanization, population growth and rising incomes have led to rapid growth of travel demand in Indian cities. The paper provides a modeling approach for forecasting urban travel demand and assessing public transport options for large metropolitan cities. A travel characteristics model is used to forecast the pattern of travel demand in Bangalore city up to the year 2014. The paper examines the scope of a public bus transport service and a mass rapid transit system for meeting the projected travel demand and thereby curtailing the growth of personal vehicles in the city.
    Date: 2006–03–28
  8. By: Victor Matheson (Department of Economics, College of the Holy Cross); Robert Baade (Department of Economics and Business, Lake Forest College)
    Abstract: Hurricane Katrina devastated the city of New Orleans in late August 2005, and debates are now underway across the country concerning strategies for reconstructing the City. Both of New Orleans’s professional sports teams, the National Football League Saints and the National Basketball Association Hornets, left the city in the wake of the storm, and the question of what the city should provide in the way of financial accommodation to encourage them to return should be considered in devising a reconstruction plan. New Orleans has hosted a disproportionate share of mega-sports events in the United States given its size and demographics. An important question concerns whether these events have contributed enough to the New Orleans economy to justify reinvestment in infrastructure to restore New Orleans’s place as a leading host of professional sports and mega-events in the United States. This paper examines the economic impact of professional sports on the New Orleans economy and concludes that the redevelopment efforts of New Orleans are better directed at first providing infrastructure that will encourage the return of its middle class citizenry and the restoration of its culture. Playing host to professional sports and mega-events does have symbolic significance, but it is arguable that the city cannot afford to invite guests until it has the means to accommodate them.
    Keywords: sports, public finance, economic impact, New Orleans, Hurricane Katrina
    JEL: H25 H71 H40 L83 Q54
    Date: 2006–03

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