Incorporating a New Measure of Travel Cost for Estimating International Travel Demand

Abstract

Most recent studies examines the international tourism demand by differentiating holiday travel into visiting friends and relatives, and business travellers, while using a new measure of travel costs for international tourists inbound to the U.S. As a new measure of travel costs, the ‘the zonal travel cost’ approach (USDA, 2000) for the measurement of travel costs is employed. The use of the zonal travel cost is a first for international travel literature. Based on this new measurement, this article examines international tourism demand for the United States (U.S.) by classifying travel demand according to the purpose of the trip and incorporating a new measure of travel costs and its determinants. Based on the pooled generalized least squares model, we find that the new measure of travel costs improves model accuracy. Second, we find that tourism demand elasticities vary by trip purpose. The latter finding is significant, as travel for business is more inelastic than tourism.