The impact of relative prices on tourism demand for Mauritius: An empirical analysis

Abstract

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 long-run 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 elasticity

Notes

⁴This study has also made use of ‘tourism receipts’ as an alternative dependent variable to proxy tourism development and the results obtained are, on the whole, similar to those reported in this research.

⁵Detailed results can be obtained from the authors upon request.