Description

The Caribbean share of the global tourism market has been declining. This study examines what isdriving tourism flows. It estimates the determinants of tourism and explores variations based onsample differences, and also constructs a static nominal price comparison index. The paper findsthat: (i) tourism arrivals and expenditure are sensitive to both price and income factors in sourcemarkets; (ii) price and income elasticities of tourism have declined since 2008; (iii) price elasticityis statistically insignificant for “high-end” destinations; and (iv) the nominal cost of an average oneweek beach holiday in the Caribbean is higher than in other beach destinations around the world.These results point to the need for structural reforms to raise product quality, cost reduction orcontainment in “low-end” destinations, including possibly via exchange rates, and an adjustment inaggregate consumption to adapt to the implications of a lower contribution to GDP from tourism.

More publications in this series: Working Papers

More publications by: Nicole Laframboise ; Nkunde Mwase ; Joonkyu Park ; Yingke Zhou