Analysis of demand for tourist services in Italy: statistical estimate and test of the Rotterdam differential model

Abstract

The behaviour of the tourist consumer is analysed on the basis of statistical data concerning holiday spending gathered from the ISTAT studies of family consumer spending in italy and estimating the parameters of the Rotterdam model of demand analysis with special reference to tourist spending. The estimation and specification problems are analysed making particular reference to seasonal factors which, in this sector, ae of singular importance. The results demonstrate the relevance of the effect of the relative prices for the evolution and composition of tourist spending. Price elasticity is very high for hotel service, -4.70: but also for the other services the values obtained for price elasticity ae high. Income elasticity is greater than one for all aspects of tourist spending and confirms that this kind of consumption can be classed with luxury goods. The estimated equations also permit us to test the validity of the basic assumptions of the neoclassical model of demand analysis, and in particular those of symmetry, negativity and homogeneity. The inferential results conform with the hypothesis under control and demonstrate that the tourist consumer behaves rationally from an economic point of view; the symmetry, negativity and homogeneity of zero degree in prices and income of demand equations indicate that the tourist consumer is not subject to monetary illusion and is capable of evaluating the effective movement of relative prices, and of taking this into consideration when deciding on holiday spending. The need for a holiday is rigid, but there are various ways of satisfying this need; the statistical analysis has demonstrated that the tourist consumer is capable of modifying the level and the composition of spending in relation to income and relative price with the aim of continuing to satisfy the need for holiday, within the budget limits, if the conditions of the problem change.