KI Traveller's Levy Economic Impact Assessment - Kangaroo Island ...

Commercial-in-Confidence
KI Traveller’s Levy
Impact Assessment
3. DESIGN CONSIDERATIONS
As highlighted by the economic considerations outlined in Section 2, a range of factors must
be taken into account in analysing the appropriate design of a potential Traveller’s Levy.
Drawing on that discussion, together with the desktop research and consultation undertaken
as part of this study, the following sub-sections discuss how a Traveller’s Levy might
optimally be designed.
3.1 THE ELASTICITY OF DEMAND FOR TOURISM: A
LITERATURE REVIEW
A key variable for modelling the impact of a Traveller’s Levy is the price elasticity of demand
for KI visitation. The price elasticity of demand demonstrates the impact of a given change in
price (in this case resulting from the introduction of a levy) on demand (in this case, visitation
to KI). More specifically, it demonstrates the percentage change in demand resulting from a
one percent change in price. Hence the value of this parameter, coupled with the size of the
levy to be imposed, is the key determinant of the impact of a Traveller’s Levy on visitation to
KI.
As part of this study, a literature review of studies analysing the price elasticity of demand for
tourism and travel was conducted. Findings from this review are presented below and have
been used to inform the parameters adopted in the modelling (see Section 4.2). As the
studies surveyed employ a range of different techniques for estimating the elasticity of
demand, and adopt a number of alternative approaches to reporting their findings, some
caution must be taken when comparing and contrasting the results of different pieces of
research.
With this in mind, the findings from the literature are reported in two broad sections. The first
reports price elasticity with respect to a single site visit (using a price base such as an
entrance fee or travel fare). The second reports price elasticity with respect to travel overall;
reporting the percentage change in demand in response to given change in the price of a
trip. Though in both cases the price elasticity estimates capture the percentage change in
demand resulting from a given percentage change in price, that given percentage change in
price will generally be significantly greater where a single site visit (and small price base) is
adopted.
Eco-tourism destinations and national parks
As a unique eco-tourism destination, some of the closest approximations in the literature to
KI consider demand elasticities for national parks. Among the most relevant studies is that of
Greiner (2003), a study which utilises a contingent valuation method to establish willingnessto-pay
for entry to the Daintree National Park in north Queensland. The study employs a
‘what-if’ scenario to assess visitors’ valuation of the particular outcome (rather than observed
market behaviour of an actual change). Four different estimation methods are applied to the
results, using a range of alternative statistical techniques. Estimates of the price elasticity of
demand fall within a range of -0.16 to -0.27 (i.e. a one percent change in price induces a
0.16% to 0.27% change in the quantity demanded).
Knapman and Stoeckl (1995) estimate the price-elasticity of demand for visitation to Kakadu
and Hinchinbrook Island to be significantly lower at -0.014 and -0.0015, respectively. Greiner
(2003) explains this by the fact that Daintree National Park is generally considered one
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