Modelling US tourism demand for European destinations

An almost ideal demand system model is used to examine US demand for tourism in European destinations. The model provides policy makers with useful information concerning the sensitivity of tourism demand to changes in relative prices, exchange rates and expenditure. The results show that price competitiveness is important for US demand for France, Italy and Spain but is relatively unimportant for the UK. France and Italy are regarded as substitutes by US tourists, as are Spain and Italy. As US expenditure rises, the market shares of Spain and the UK decline, while France and Italy benefit. The demand modelling and forecasting indicate that in the absence of a tourism price index, the choice between alternative price indices does not have a significant effect on the results.