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A frequent mistake in aggregate tourism demand modeling: The use of a composite price index of competing destinations

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  • Jaume Rosselló-Nadal
  • Andreu Sansó-Rosselló

Abstract

Price is a cornerstone of aggregate tourism modelling, and yet its measurement poses considerable challenges. In this study, we propose a theoretical framework for accurately assessing destination and substitute destination prices, comparing it with empirical methodologies and examining their impact on elasticity estimations. Our findings show that while destination price can be gauged by comparing the consumer price indices of the destination and origin adjusted by the nominal exchange rate, using a weighted measure of substitute prices across various destinations can bias the elasticity estimations of the remaining variables. We advocate separate assessments of the prices of alternative destinations, as opposed to an aggregate one.

Suggested Citation

  • Jaume Rosselló-Nadal & Andreu Sansó-Rosselló, 2025. "A frequent mistake in aggregate tourism demand modeling: The use of a composite price index of competing destinations," Tourism Economics, , vol. 31(4), pages 777-788, June.
    • Handle: RePEc:sae:toueco:v:31:y:2025:i:4:p:777-788
    DOI: 10.1177/13548166241273558
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