Edith Cowan University
Place of Publication
Joondalup, Western Australia
Faculty of Business and Law
School of Accounting, Finance and Economics
This study estimates the income and tourism price elasticities of demand for Australian domestic tourism using a panel data approach. Given that about 76% of total tourism revenue in Australia is generated by domestic tourism, it is worthwhile examining whether changes in Australian households’ income and the prices of domestic travel can influence the demand for domestic travel. The research employs a panel data approach. This method has been widely employed in the literature on international tourism demand, but thus far, has not appeared in the context of the domestic tourism demand literature. The model used for this study is panel Three-Stage Least Square (3SLS). The data employed are based on quarterly time-series from 1999 to 2007 across seven Australian States. The paper reveals some notable results. First, the income elasticity for domestic visiting friends and relatives (VFR) trips in Australia is negative, implying that Australian households will not choose to travel domestically when there is an increase in household income. Second, the national income variables are positively correlated with domestic business tourism demand, indicating that the demand is strongly responsive to changes in Australia’s economic conditions. Third, an increase in the current prices of domestic travel can cause the demand for domestic trips to fall in the next one or two quarters ahead. Finally, the coefficients for lagged dependent variables are negative, indicating perhaps, that trips are made on a periodic basis.