the price of tourism in the context of global oil prices s. becken: lincoln university a. carboni,...
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The price of tourism in the The price of tourism in the context of global oil pricescontext of global oil prices
S. Becken: Lincoln UniversityA. Carboni, A. Schiff, S. Vuletich, J. Small: Covec Ltd
J. Lennox: Landcare Research
BackgroundBackground
• 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 Zealand2. Analysing economy-wide effects (CGE)3. Adaptation measures for the sector
Fuel priceFuel price
Source: Ministry of Economic Development (Dec. 2008)
Source: Ministry of Economic Development (Dec. 2008)
SegmentSample size in 2007
Market share in 2007
Total Adults arrivals in 2007
Australia FIT Holiday 312 13.0 291,087 Australia FIT VFR 296 12.7 286,005 Australia FIT Other 252 8.7 195,029 Australia Tour 79 3.9 86,823 UK Holiday 305 6.3 141,995 UK VFR and Other 257 5.6 126,081 USA FIT Holiday 265 4.2 93,247 USA FIT VFR and Other 226 2.9 64,537 USA Tour 97 1.6 35,032 Japan FIT Holiday 107 1.4 30,509 Japan FIT VFR and Other 138 1.2 26,957 Japan Tour 161 2.5 56,418 South Korea All 238 3.8 85,592 China FIT 174 1.2 27,000 China Tour 217 3.7 82,995 Germany All 182 2.5 55,082 Rest of World FIT 1760 22.4 503,736 Rest of World Tour 180 2.5 55,862 Total 5246 100.0 2,243,987
Segments used in this researchSegments used in this research
Fuel purchaseFuel purchase
The average amount spent on fuel (directly) by a tourist in each segment
Spend per trip on fuel, based on Car+Campervan kms
$-$50.00
$100.00$150.00
$200.00$250.00
$300.00$350.00
Austra
lia F
IT H
oliday
Austra
lia F
IT V
FR
Austra
lia F
IT O
ther
Austra
lia T
our
UK Hol
iday
UK VFR
and
Oth
er
USA FIT
Hol
iday
USA FIT
VFR
/Oth
er
USA Tour
Japa
n FIT
Holi
day
Japa
n FIT
VFR/O
ther
Japa
n Tou
r
South
Kor
ea A
ll
China
FIT
China
Tou
r
Ger
man
y All
Rest o
f Wor
ld F
IT
Rest o
f Wor
ld T
our
0
200
400
600
800
1000
1200
1400
UK Holiday UK VFR and Other
USA FIT Holiday
USA FIT VFR and
Other
USA Tour
2006 2007
0
200
400
600
800
1000
1200
1400
UK Holiday UK VFR and Other
USA FIT Holiday
USA FIT VFR and
Other
USA Tour
2006 2007
0
200
400
600
800
1000
1200
1400
UK Holiday UK VFR and Other
USA FIT Holiday
USA FIT VFR and
Other
USA Tour
2006 2007
Example: UK and USA segments
BUS/COACH
CAR
DOMESTIC AIR
Comparisons across segments Comparisons across segments and change over timeand change over time
Consumption bundles and Consumption bundles and Price IndicesPrice 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 bundlesConsumption bundles
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Australia FIT HolidayAustralia FIT VFR
Australia FIT OtherAustralia Tour
UK HolidayUK VFR and Other
USA FIT HolidayUSA FIT VFR and Other
USA TourJapan FIT Holiday
Japan FIT VFR and OtherJapan Tour
South Korea AllChina FIT
China TourGermany All
Rest of World FITRest of World Tour
ACCOMMODATION AIR TRANSPORT OTHER TRANSPORT FUEL ALL OTHER
Underlying NZ Price IndicesUnderlying NZ Price Indices
800
900
1000
1100
1200
1300
1400
1500
1600
1700
1800
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Accommodation
Domestic air transport
Domestic road transport
Fuel
All other (CPI)
Price Change in NZD 1997-2007Price Change in NZD 1997-2007
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%25.8%
25.4%
25.0% 25.5% 26.0% 26.5% 27.0% 27.5% 28.0%
Australia FIT HolidayUSA FIT Holiday
USA FIT VFR and OtherUK VFR and Other
UK HolidayGermany All
AVERAGERest of World FITJapan FIT Holiday
Rest of World TourAustralia FIT VFR
Australia FIT OtherJapan FIT VFR and Other
Japan TourUSA Tour
Australia TourChina FIT
South Korea AllChina Tour
CPI increased 24.1% over the same period.
Exchange Rate EffectsExchange Rate Effects
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
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
Australia FIT Other
Australia Tour
UK VFR and Other
UK Holiday
Price Change inForeign Currency
Price Change inNZD
Total price change 1997 – 2007
International ArrivalsInternational 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
© Covec Ltd 2008 October 2008
Variable Coefficient
Consumption 0.05
CPI -2827
Exchange Rate -364
OTG Price 0.45
Oil Price -215
q1 7626
Constant 215032
For example: KoreaFor example: Korea
OutlookOutlook
• 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