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Analyzing How Tourism Sub-Industries Expenditure and Price Elasticities Change Over Time

Adrian R. Fleissig

This study finds that substitution and expenditure elasticities for six U.S. sub-tourism industries vary considerably over time, which should be taking into account by marketing strategies of tourism agencies and governments. There is evidence of increased variation in substitution and expenditure elasticities over the business cycle as well as from 2001-2003 and 2009-2011 when tourism expenditure declined. Given that air transportation was found to have the most price elastic demand, tourism agencies and governments should pay less attention to marketing air transportation during an economic slowdown and focus more on the less price elastic tourist expenditures of food and beverages as well as other related-transportation commodities. Air transportation, shopping, and accommodation are typically found to be luxuries over the business cycle while food and beverages are necessary goods. Another important result is that over time air transportation and other related-transportation commodities are substitutes. In contrast, air transportation are complements with the remaining sub-industries throughout the sample.