Inbound vs Outbound Price Elasticities
One further adjustment that may need to be applied to the price elasticity estimates in table 3 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 3 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.
Faced by a passenger or environmental tax the outbound passenger must either pay or not travel. However, the inbound overseas passenger can choose to travel to a different destination or transit by another hub and avoid the tax. This is particularly the case for holiday travel or transfer and transit passengers, which are much more price sensitive than travel for business or visiting friends and relatives. Inbound travel originating from overseas will be more price sensitive i.e. will have a larger price elasticity in absolute terms, than outbound travel.
For example the UK in 2006 had 185.5 million international arrivals or departures from UK airports, 61% of which were arrivals or departures by UK residents and 39% by overseas residents or passengers transferring and transiting. Of these passengers 77% were travelling on short-haul trips to Europe, 9% transatlantic and 14% other long-haul. Using the elasticities in table 3 an average price elasticity for UK inbound and outbound travel can be derived of -1.0.
Inbound vs Outbound Price ElasticitiesOne further adjustment that may need to be applied to the price elasticity estimates in table 3 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 3 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.Faced by a passenger or environmental tax the outbound passenger must either pay or not travel. However, the inbound overseas passenger can choose to travel to a different destination or transit by another hub and avoid the tax. This is particularly the case for holiday travel or transfer and transit passengers, which are much more price sensitive than travel for business or visiting friends and relatives. Inbound travel originating from overseas will be more price sensitive i.e. will have a larger price elasticity in absolute terms, than outbound travel.For example the UK in 2006 had 185.5 million international arrivals or departures from UK airports, 61% of which were arrivals or departures by UK residents and 39% by overseas residents or passengers transferring and transiting. Of these passengers 77% were travelling on short-haul trips to Europe, 9% transatlantic and 14% other long-haul. Using the elasticities in table 3 an average price elasticity for UK inbound and outbound travel can be derived of -1.0.
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