Ex Post Demand for Australian Tourism Goods and Services

This study examines the economic parameters underlying the ex post demand for Australian tourism goods and services from ten source markets in Asia, Europe and North America. The results suggest that demand for the five broad commodity aggregates – accommodation, food, transport, shopping and entertainment – representing the key consumption by tourists, is price-inelastic, implying that all goods are necessities from the tourist's point of view. This result is consistent with the empirical reality that, once he or she has arrived in a destination, a tourist is bound to consume the available goods and services. A second important finding is the apparent complementarity of demands. This indicates that tourists tend to purchase a bundle of goods and services, all of which are necessary for the maximization of utility from visitation. The analysis also suggests that the underlying price elasticities exhibited through cross-price elasticity values have important implications for how price sensitivities can be better understood.