An almost ideal demand system (AIDS) analysis of Korean travelers' summer holiday travel expenditure patterns

Abstract

This study analyzes expenditure categories of travelers on their summer holiday trips, jointly with the effects of travel duration, number of travel companions, and travel type. Results of the almost ideal demand system (AIDS) estimation on data from 1,113 Korean respondents reveal strong interrelationships among expenditure, own‐price, and cross‐price elasticities in the total travel‐related consumption behaviors. This study of a system‐of‐equations approach serves as a launch pad for ongoing work by jointly modeling effects of trip characteristics and prices through a comprehensive, nonlinear AIDS approach and reflecting destination price changes for Koreans who traveled during their summer holidays.

Habit persistence in tourist sub-industries

“…Tourism expenditure on food and beverages is the most price inelastic (−0.217) which is expected as these commodities are typically considered necessary expenditures. However, Ahn et al (2018) found evidence of elastic demand for food and beverages. Shopping expenditure in this study includes a wide range of nondurable goods that are typically less costly items.…”

“…Expenditure on air transportation is often a significant share of travel expenditure and tends to be more price elastic, especially when consumers have less expensive alternative options like cars, rail, and other forms of transportation. The meta-analysis of Peng et al (2015) found that the average own-price elasticity estimate for international air transportation was inelastic at −0.920 while the estimate of Divisekera (2010) is inelastic at −0.52 and Ahn et al (2018) elastic at −3.40. The price elastic estimate for air transportation may also be due to accounting for habit persistence.…”

“…For shopping, the price elasticity is inelastic at −0.876 and slightly less inelastic than Divisekera (2010). Wu et al (2012) found that shopping can be elastic or inelastic in demand for their analysis of tourist spending by Chinese, Japanese, or Taiwanese tourists and Ahn et al (2018) have an elastic demand for Korean tourism. Accommodation is a necessary expenditure and often price inelastic.…”

“…The price elasticity estimate for recreation and entertainment is less inelastic than the entertainment elasticity estimates for the U.S., New Zealand, Japan, and UK. of Divisekera (2010) but Ahn et al (2018) has an elastic demand for Korean tourism.…”

“…Expenditure across different tourist sub-industries like accommodation, food, sightseeing, transport, shopping, entertainment, and miscellaneous expenditure have been analyzed by Divisekera and Deegan (2010) for Ireland, Divisekera (2010) for Australia, Wu, Li, and Song (2012) for Asian tourism, Ahn, Baek, Lee, and Lee (2018) for Korea, and Aratuo and Etienne (2019) for the United States. These studies do not focus on consumer habits but have varying degrees of substitution, complementarity, and budget elasticities across tourist commodities which have important consequences for tourist marketing, revenue, and policy.…”