Demand for Australian Tourism by International Tourists: An Expenditure Allocation Model

A model of allocation of tourist expenditures was estimated to examine the economic parameters underlying the demand for Australian tourism goods and services by foreign tourists. The model was applied to major and minor source s of tourists to Australia. The elasticities derived from the two models show broad similarities, elasticities of demand for food are similar in magnitudes; expenditure elastic ities are greater than unity and pr ice elasticities are closer to unity. Similarly, the magnitudes of elasticities in relation to two other key components of tourists’ consumption, accommodation and transpor tation, are also broadly similar. Elasticities of demand for the three major consumption item s, food, accommodation, and transportation are price and expenditure inelastic implying that the three commodities are necessities from the tourists’ point of view. The same consistency, however, is not evident in the elasticity parameters in relation to the commodity groups shopping and entertainment. These variations may reflect the differences in preferences of tourists from various sources