Inbound vs Outbound Price
Elasticities
One further adjustment that may need to be applied to the
price elasticity estimates in table 1 is for the case when
the passenger flow of concern is inbound or outbound,
not the total or average impact. This will be of particular
importance when considering the impact on inbound
tourism of, for example, a national passenger tax. It
also matters when considering the diversion of inbound
passengers and consequent reduction of effectiveness
of a national or regional environmental tax.
The price elasticity estimates in table 1 are all averages
of outbound and inbound passengers. Most databases
of passenger numbers and fares do not distinguish
between domestic residents travelling overseas then
returning, and overseas residents visiting and then
returning home. However, their sensitivity to travel
prices including taxes will differ.
These estimates will be verified by future research.
Meanwhile a reasonable rule-of-thumb multiplier to
adjust the price elasticities in table 1 is as follows:
Inbound travel by overseas residents = -1.3/-1.0
= 1.3 * table 1 price elasticity
Outbound travel by domestic residents = -0.8/-1.0
= 0.8 * table 1 price elasticity