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

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Commercial-in-Confidence KI Traveller’s Levy Impact Assessment component of the broader Tropical North Queensland trip, whereas Kakadu and Hinchinbrook Island are destinations in themselves. In an overseas example, the price elasticity of demand was found to be considerably higher. Reynisdottir et al (2008) employ a similar survey to that of Greiner (2003) to establish willingness to pay for Icelandic national parks, finding a price elasticity of demand at the median willingness to pay of -0.68 at Gulfess and -0.61 at Skaftafell (two Icelandic tourist destinations). TABLE 3.1: NATIONAL PARK ESTIMATES OF ELASTICITY FROM THE LITERATURE Reynisdottir, Song, Agrusa 2008 Greiner 2003 Knapman, Stoeckl 1995 Entry to national parks in Iceland Gulfess -0.68 Skaftafell -0.61 Elasticity of demand for Daintree National Park Elasticity of demand for recreation use fees Open-ended bid -0.27 Tobit open-ended bid -0.16 Double-bound dichotomous -0.16 Double-bound/open-ended -0.19 Kakadu -0.014 Hinchinbrook -0.0015 Price elasticity of demand for general travel A wide range of studies looking at travel more generally indicate that elasticities differ based on whether visitors are classified as “short-haul” or “long-haul”. IATA (2007), analysing US data, undertake an econometric regression to develop estimates in the context of air travel, generating figures of -1.4 for route-market level (roughly equivalent to intrastate travel), -0.8 for national level, and -0.6 for international level. The results of Crouch (1994) support this finding with estimated elasticities of -0.60 and -0.48 for short- and long-haul travel, respectively. The suggested rationale underpinning such findings is that shorter routes have a greater number of alternatives and that price-awareness for destinations within close proximity is likely to be greater (Crouch, 1994). Divisekera (2003) generates results that somewhat contrast those of IATA and Crouch, finding more significant determinants of relative price-elasticity to be market maturity and traveller preferences, with tradition destinations (for a given source market) being among the most inelastic. Overall, the range of elasticities for international travel to Australia is found to be marginally higher than IATA, at between -0.93 and -2.04. BTE (1995) analyse how purpose of trip impacts on elasticity among international travellers. The study looks at long-run effects of changes in prices, particularly airfares, on visitation to Australia. Separate dynamic models of demand are estimated for leisure and business travellers to Australia from 12 different countries (accounting for some 79% of total visitors to Australia in 1994). Price elasticity estimates are found to be considerably higher for leisure travellers, with the estimates for holidaymakers ranging between double (Germany) and eight times the elasticity of business travellers (Table 3.2). 19
Commercial-in-Confidence KI Traveller’s Levy Impact Assessment TABLE 3.2: GENERAL TRAVEL ELASTICITY ESTIMATES FROM THE LITERATURE Study Variable of interest Elasticity estimate Divisekera 2003 Expenditure compensated international travel to Australia NZ -0.93 US -1.20 Japan -2.04 UK -1.23 BTE 1995 Air travel to and from Australia Business Leisure Ger -0.55 -1.23 IATA 2007 Crouch 1994 Demand elasticities for air travel (USA data) Elasticities for Short-Haul versus Long-Haul Tourism Implications for Kangaroo Island UK -0.21 -1.79 Jap -0.24 -0.79 Kor -0.20 -0.50 Sin -0.22 -1.86 NZ -0.16 -0.68 USA -0.45 -1.85 Route-market level -1.4 National level -0.8 International level -0.6 International business -0.265 International leisure -1.04 Short domestic business -0.7 Short domestic leisure -1.52 Short- haul -0.60 Long-haul -0.48 As well as establishing a range in which the elasticity of demand for tourism lies generally, the findings from the literature have a number of direct implications for the elasticity of demand for visitation to KI: demand by leisure travellers (the vast majority of the KI market) will be relatively more elastic than visitors who travel for the purpose of visiting friends and relatives or business; demand by domestic visitors, particularly intrastate travellers, will be relatively elastic compared with international visitors; among each of these groups of travellers, demand will be relatively less elastic among those visitors for whom KI is the primary destination on their trip; and overall, as a relatively more unique destination for which there are limited substitutes, the elasticity of demand for visitation to KI is likely to be toward the more inelastic end of the spectrum. 20
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