Economic effects of advertising expenditures – a Swedish destination study of international tourists

ABSTRACT

This study estimates the effects of advertising on international tourism demand for the leading Swedish mountain destination Åre. In contrast to previous studies, which primarily focus on tourism demand at a national or sectorial level, this research is conducted at the destination level. The study considers price levels at tourism destinations and tourists’ income as determinants for tourism demand. However, following advertising theories and previous research, the dominance of the market power function (i.e. product differentiation) and the information function (i.e. market transparency) are identified as major co-determinants for international tourism demand. Demand elasticity coefficients are empirically estimated for the origin countries Norway, Finland, the Russian Federation, Denmark and the UK. Findings show that advertising is a significant driver of tourism demand from Norway, the UK and Russia. Interestingly, income and tourism price levels are less significant drivers of demand in all analysed origin markets.

KEYWORDS:

• Advertising effects
• destination advertising
• tourism demand
• advertising theory
• price elasticity

JEL Classification:

• M37

Acknowledgements

The authors would like to thank the managers Niclas Sjögren-Berg and Anna Wersén (Ski Star Åre), Lars-Börje Eriksson (Åre Destination AB), Peter Nilsson and Hans Ericsson (Tott Hotel Åre), and Pernilla Gravenfors (Copperhill Mountain Lodge Åre) for their excellent cooperation. Finally, the authors wish to thank Prof. Dimitri Ioannides (The European Tourism Research Institute, Mid-Sweden University) for valuable comments.

Disclosure statement

The authors acknowledge that no financial interest arises from the direct application of their research.

Supplemental data

Supplemental data for this article can be accessed at http://dx.doi.org/10.1080/09584935.2015.1101013.

Additional information

Funding

This work was supported by the KK-Foundation project ‘Engineering the Knowledge Destination’, under Grant 20100260 (Stockholm, Sweden).