The price of tourism in the
context of global oil prices
S. Becken: Lincoln University
A. Carboni, A. Schiff, S. Vuletich, J. Small: Covec Ltd
J. Lennox: Landcare Research
Background
•
•
•
3-year FRST-funded project on
Tourism & Oil
Aim: to help manage tourism’s
vulnerability to global oil prices
Three objectives:
1. Modelling tourist behaviour IN and TO
New Zealand
2. Analysing economy-wide effects (CGE)
3. Adaptation measures for the sector
Fuel price
Source: Ministry of Economic Development (Dec. 2008)
Source: Ministry of Economic Development (Dec. 2008)
Segments used in this research
Segment
Australia FIT Holiday
Australia FIT VFR
Australia FIT Other
Australia Tour
UK Holiday
UK VFR and Other
USA FIT Holiday
USA FIT VFR and Other
USA Tour
Japan FIT Holiday
Japan FIT VFR and Other
Japan Tour
South Korea All
China FIT
China Tour
Germany All
Rest of World FIT
Rest of World Tour
Total
Sample
size in
2007
312
296
252
79
305
257
265
226
97
107
138
161
238
174
217
182
1760
180
5246
Market share
Total Adults arrivals in 2007
in 2007
13.0
12.7
8.7
3.9
6.3
5.6
4.2
2.9
1.6
1.4
1.2
2.5
3.8
1.2
3.7
2.5
22.4
2.5
100.0
291,087
286,005
195,029
86,823
141,995
126,081
93,247
64,537
35,032
30,509
26,957
56,418
85,592
27,000
82,995
55,082
503,736
55,862
2,243,987
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Fuel purchase
The average amount spent on fuel (directly) by a tourist in each
segment
Spend per trip on fuel, based on Car+Campervan kms
$350.00
$300.00
$250.00
$200.00
$150.00
$100.00
$50.00
$-
Comparisons across segments
and change over time
1400
Example:
UK and USA segments
2006
1200
2007
1000
800
600
DOMESTIC AIR
400
CAR
200
0
BUS/COACH
UK Holiday
1400
UK VFR
and Other
USA FIT
Holiday
USA FIT
VFR and
Other
USA Tour
1400
2006
1200
2007
1000
1000
800
800
600
600
400
400
200
200
0
0
UK Holiday
UK VFR
and Other
USA FIT
Holiday
USA FIT
VFR and
Other
USA Tour
2006
1200
UK Holiday
UK VFR
and Other
USA FIT
Holiday
USA FIT
VFR and
Other
2007
USA Tour
Consumption bundles and
Price Indices
• We determined the consumption bundle for each
segment based on:
–
–
–
–
Accommodation
Road and air transport
Fuel (petrol)
Other
• We have calculated price indexes (based on
Statistics NZ) to represent the price of the bundle of
tourism products consumed by tourists in each
market segment.
• We fixed consumption bundles at their 2006 levels,
and apply that pattern to price indices.
Consumption bundles
Australia FIT Holiday
Australia FIT VFR
Australia FIT Other
Australia Tour
UK Holiday
UK VFR and Other
USA FIT Holiday
USA FIT VFR and Other
USA Tour
Japan FIT Holiday
Japan FIT VFR and Other
Japan Tour
South Korea All
China FIT
China Tour
Germany All
Rest of World FIT
Rest of World Tour
0%
ACCOMMODATION
10%
20%
AIR TRANSPORT
30%
40%
50%
60%
OTHER TRANSPORT
70%
80%
FUEL
90% 100%
ALL OTHER
Underlying NZ Price Indices
1800
Accommodation
Domestic air transport
Domestic road transport
Fuel
All other (CPI)
1700
1600
1500
1400
1300
1200
1100
1000
900
800
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Price Change in NZD 1997-2007
Australia FIT Holiday
USA FIT Holiday
USA FIT VFR and Other
UK VFR and Other
UK Holiday
Germany All
AVERAGE
Rest of World FIT
Japan FIT Holiday
Rest of World Tour
Australia FIT VFR
Australia FIT Other
Japan FIT VFR and Other
Japan Tour
USA Tour
Australia Tour
China FIT
South Korea All
China Tour
25.0%
28.0%
28.0%
27.2%
27.2%
27.2%
27.0%
26.8%
26.7%
26.6%
26.5%
26.5%
26.3%
26.3%
26.1%
26.1%
26.0%
25.8%
CPI increased 24.1%
25.8%
the same period.
25.4%
25.5%
over
26.0%
26.5%
27.0%
27.5%
28.0%
Exchange Rate Effects
Total price change 1997 – 2007
USA FIT Holiday
USA FIT VFR and Other
USA Tour
South Korea All
Japan FIT Holiday
Japan FIT VFR and Other
Japan Tour
China FIT
China Tour
Germany All
Australia FIT Holiday
Australia FIT VFR
Price Change in
Foreign Currency
Australia FIT Other
Australia Tour
Price Change in
NZD
UK VFR and Other
UK Holiday
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
International Arrivals
• Linear regression
• Quarterly data 1997-2006
• General – to – specific model selection
process
•
•
•
•
•
•
•
•
Real consumption per capita (foreign)
Real GDP per capita (foreign)
CPI (foreign)
Exchange rate (foreign with $NZ)
Oil price (world price)
OTG price index (in foreign currency)
Airfare (in foreign currency)
Quarterly dummy variables
For example: Korea
Variable
Consumption
CPI
Exchange Rate
OTG Price
Oil Price
q1
Constant
© Covec Ltd 2008
October 2008
Coefficient
0.05
-2827
-364
0.45
-215
7626
215032
Outlook
• More work on price elasticity
• Input into Computable General
Equilibrium Model
• Research on energy behaviour in
tourism businesses (published)
• Tourist behaviour
• Identifying at risk destinations, products
and markets