Analysis of demand for international tourism in northern Mediterranean countries

This study examines the demand for the international tourism products of six northern-Mediterranean countries by the nine primary tourism generating nations of Europe. Based on utility maximization, the methodology employs one translogarithmic indirect utility function for each tourism generating country. This function is quadratic in the logarithms of prices normalized by the total expenditure on tourism. As the representative of demand functions, the budget share equations for the receiving countries were obtained from this indirect utility function. These budget share equations in turn are simultaneously estimated by using the maximum likelihood procedure that employs a multivariate nonlinear regression estimation technique.;Data cover 20 years between 1966 and 1985. Proxies are developed for the three basic variables, the quantity and the price of international tourism, and the total expenditures of international travellers.;Parameters of the estimated budget share equations are used to calculate the elasticity coefficients for each year. At the same time, the analysis is extended to examine if the tourist behavior is homothetic and/or additive.;The results have generally reaffirmed the finding of earlier studies that international tourism is a luxury good. Yet, income elasticities exhibit a distinct pattern. As income levels rise, income elasticity coefficients decline. Tourism demand for the majority of the destinations is found to be price-inelastic. Interdependencies for every pair of destinations are established simultaneously. A majority of the interdependencies are found to be complementary. On the basis of likelihood ratio tests, both hypotheses that tourist preferences are additive and that tourist preferences are homothetic can not be confirmed.;The results of this study may be used by the tourism policy makers of the tourist receiving countries included in this study to establish their promotion strategies independently as well as in tandem with other nations.