The price of tourism in the context of global oil prices

Abstract

Tourism in its present form is inherently dependent on oil. Tourism transport almost exclusively runs on fossil fuels and also other components of the tourism product such as accommodation or attractions rely on the input of oil into their production. Consequently, global oil prices, alongside other factors, are influencing the price a tourist has to pay, depending on how exactly they compose their tourism ‘consumption bundle’. For the case of New Zealand, the consumption bundles of 18 tourist segments (based on country of origin, travel style and purpose) were derived and changes in price between 1997 and 2007 were observed. The results show that transport related components increased in price above inflation rates, and segments that relied heavily on transport were therefore more affected than those whose consumption centred on sectors such as accommodation and retail. Moreover, comparisons with exchange rates show that the relative price of tourism in New Zealand is determined more by currency fluctuations than by other price effects, including that of oil. These results alongside with econometric models that relate international arrivals to oil price, and a tourism Computable General Equilibrium model will allow to assess those parts of tourism that will be most affected by global oil prices.