War, terror, and the tourism market in Israel

Aliza Fleischer, Steven Buccola

Research output: Contribution to journalArticlepeer-review

109 Scopus citations

Abstract

A supply and demand model of the Israel hotel industry is developed, distinguishing between its domestic and foreign sectors. Model simulations are employed to examine the impacts of war and terrorist incidents on tourist activity and hotel revenues. Foreign demand for Israeli hotel stays is highly price-elastic and income-inelastic, and moderately sensitive to terrorist events. Domestic demand is price-inelastic, income-elastic, and terror-insensitive. In the wake of terror attacks, hotels' supply or minimum prices to Israeli tourists shift downward, reducing local market prices and encouraging more local tourism. However, the magnitude of these shifts is minor, and the local market thus provides little buffer for dropoffs in foreign tourism. By permitting excess capacity in such fashion, hotels respond rationally to the price inelasticity of local demand.

Original languageAmerican English
Pages (from-to)1335-1343
Number of pages9
JournalApplied Economics
Volume34
Issue number11
DOIs
StatePublished - 2002

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