An analysis of consumption behaviour of foreign tourists in Ireland

Abstract

The objective of this article is to analyse the consumption behaviour of foreign tourists in Ireland. Based on the Almost Ideal Demand System, five demand systems are estimated, four representing the major source markets of tourists to Ireland, namely from Britain, North America, Mainland Europe and Rest of the World; and one aggregate model based on a pooled sample. Each system included six commodity aggregates representing the major consumables of tourists. Estimated models were statistically significant and the derived elasticities are theoretically consistent and empirically plausible. While there are some variations in the consumption patterns of tourists from different source markets, reflecting differences in consumer preferences and consumption habits, in general, tourist demand for the various Irish tourism goods and services is found to be price inelastic. This finding is consistent with a priori expectations, as tourists are obliged to consume whatever is available at the destination they visit. The lack of substitutes and perfect information on product markets offer limited consumption opportunities for the tourists. Nonetheless, the cross-price elasticity values for all commodities across the source markets indicate gross complementarity, which suggests that latent price sensitivity exists in the background. This is an area that needs further investigation and this finding may have significant, yet unknown, consequences for repeat visitation.

Notes

¹There is a sizable literature on empirical tourism demand analysis focusing mainly on international tourism. Following the pioneer study by O’Hagan and Harrison (1984) on US demand for tourism in Western Europe, which appeared in this journal, a number of further studies followed (see, for example, White, 1985; Bakkal, 1991; Syriopoulos and Sinclair, 1993; Papatheodorou, 1999; De Melo et al., 2002; Divisekera, 2003). Based on the systems approach to demand modelling, these studies attempt to quantify economic parameters underlying the demand for international tourism from chosen origin countries. These studies may be considered as modelling the ex ante tourism demand (i.e. destination choice) while the present study models the ex post tourist demand (the demand for tourism goods and services).

²We are indebted to Brian Maher, Head of Research and Policy Division, Failte Ireland for supplying the data.