Anomaly in Spanish Tourist Sensitivity to Price

The literature suggests that the effect of price on destination choice can be either positive or negative and income is considered an important determinant of tourist decisions, so that tourism products are thought to behave like ‘normal goods’. Given that studies have paid little attention to the relationship between income and sensitivity to price, this paper analyses the relationship between income and tourists' sensitivities to price. The author identifies and measures these sensitivities – individual by individual – from real choices made by tourists: that is, tourist sensitivity to price is estimated for each individual by observing the destination he or she actually selects. The empirical application is carried out on a sample of 2,127 individuals and the operative formalization used to estimate individual sensitivities to price follows a random coefficient logit model. To detect how the sensitivities relate to income, a regression analysis is employed. The results show an anomalous relationship: income levels moderate tourist sensitivity to price such that increases in the first levels of income reduce the negative effect of price (as expected), but there is a ‘saturation point’ – that is, beyond a threshold, tourist sensitivity to price increases again (the negative effect of price reappears) – against expectations for these high-income earners.