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From an economic perspective, a tourist's choice to travel to a destination is influenced by two broad factors, his/her income level and the cost that he/she will face when undertaking the holiday. The cost is composed of the prices of goods and services which make up the tourism product, for example prices of air ticket, accommodation, food, entertainment to name a few. For remote destinations like Australia , the proportion of the cost that is taken up by the airfare, is substantial and can play a deterministic role in the choice of destination or on the duration of the holiday. Air travel and tourism can therefore, be classified as complements. This implies that the price of one will influence the demand for the other. However, the research literature tends to treat the ‘tourism' and the aviation industries as separate industries. Although some attempts to model the demand for tourism consider the impact of airfares, in general more recent studies, tend to ignore the latter as an element in destination choice. This may be valid when the reason for travelling is business, but does not hold when the main purpose of travel is leisure. On the other hand, the only price that aviation economists consider when exploring factors that have an impact on the number of passengers boarding a plane is that of air ticket. There is a need to reconcile the two sets of literature.
The aim of this study is to quantity the relationships that exist between the number of visitors that travel by plane to Australia and variables such as airfare, prices of tourism goods and services in Australia and other economic factors such as the income of the traveller and real exchange rates. This will be done by investigating the mechanism through which prices are set in the aviation industry in the short-run when the number of seats provided on the market for air travel to Australia is fixed, and in the long-run when the number of seats supplied by the airline company varies. Additionally, the correlations between airfares and the duration of the stay of the visitors in Australia will also be investigated.
This research is being funded through a Sustainable Tourism CRC Industry (Qantas) Scholarship.
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