Inbound Tourism, Hospitality Business, and Market Structure

Abstract

In this article, a standard model is used to examine the economic effect of market structure in travel destinations. We show that favorable changes in the push and pull factors are good for enhancing local hospitality business to the extent that they stimulate external tourism demand. We also find that rising competition in the hospitality industry, albeit boosting its sales, may have no effect on its revenue but can affect its profitability adversely due to resulting price drops that are desirable only to incoming visitors. Our policy implication is that there is no need to push for competitive industry structure, which is locally inefficient given that hospitality business catering to nonresident tourists is for profit and not for altruism.