Airport relocation and expansion and the estimation of derived tourist demand: The case of Eilat, Israel

This paper looks at capacity expansion relating to an airport and the derived tourist demand that this facilitates. The context is the airport relocation planned for the tourist destination of Eilat, Israel. The paper addresses three issues. First, using a multi-regional input output model for Israel, we estimate the magnitude of the static inter-sectoral impacts associated with airport construction and operation and their impact on the regional and national economy. Second, we focus on the lag effects in this process as increased tourism demand does not elicit an immediate response on the supply side in terms of new hotel investment. Third, on the demand side, we estimate additional tourism expenditure in non-hotel activities over the period that the market adjusts and beyond.

► We estimate the ‘gateway’ function of an airport for the tourist industry.
► Seventy percent of the airport multiplier effect is retained within-region.
► Household demand comprises two-thirds of the airport multiplier.
► A six year lag in hotel investment in response to airport relocation.