Destination Price Competitiveness: Exchange Rate Changes versus Domestic Inflation

Abstract

The price competitiveness of tourism is an important determinant of inbound visitor numbers. Price competitiveness indices can be used to explore questions of how a destination changes in this respect over time and the causes of any changes. A method of constructing tourism price competitiveness indices is outlined here. The method allows the various determinants of tourism price competitiveness, such as exchange rate and price changes, to be highlighted and their influence on the indices to be identified. The method also allows for comparison of a destination’s tourism price competitiveness relative to domestic tourism in origin markets and for its overall price competitiveness relative to major competitors. Results are presented for 19 tourism destinations during the period from 1985 to 1998 using Australia as a base case.