More or better? Quantity and quality issues in tourism consumption

The tourism industry faces a dilemma. To grow tourism expenditures, industry decision makers must either increase capacity or improve quality. The ability to decompose tourism expenditures into their quality and quantity components can provide insight to this process. In this study, a theoretical model of household demand for tourism was developed, distinguishing between quality and quantity of the households' vacations. Income and price elasticities for both level of quality and number of vacation days are derived. By applying this model to Israeli data, it was found that about half of the increase in vacation demand, measured in quality units, is due to increases in the level of vacation quality, and the other half to increases in the number of vacation days.