A trend observed recently in the household demand for vacations has been towards multiple but shorter vacations and higher-quality tourism services. It is argued in this paper that analysing vacation expenditure without distinguishing between its components - the quality, quantity and duration of vacations - can be misleading. The authors develop a theoretical model to analyse the properties of household demand functions for these vacation components. By applying the model to Israeli data, they find that the rise in income and quality-adjusted price are responsible for the increase in the number of vacations and their level of quality. The increase in the wage rate (time cost) is the main impetus behind the observed trend towards short vacations.
- Demand elasticities
- Vacation demand