French and German tourism in the Mediterranean – a market share analysis

Abstract

Tourism is an important economic sector for Mediterranean countries, and these compete for market share. In our study we look at the evaluation of market shares amongst a group of seven Mediterranean countries for both German and French tourists. Our data shows that these shares have changed significantly over the period 1963-2009. We utilise the Almost Ideal Demand System, a model grounded in economic theory, to understand what has driven these changes. The estimated own-price elasticities indicate the sensitivity of demand to price increases in each country, while cross-price elasticities shed light on the relative complementarity and substitutability of the holiday destinations. We find that while Spain was relatively unaffected by the development of the tourism market in countries such as Cyprus, Malta and Turkey, Italy lost significant market share, in part due to a relative loss of competitiveness. An innovation of this study is an assessment of the stability of the elasticity estimates over the sample. In line with other studies in this area, we highlight that the results of this study can serve as useful information for policymakers in the formulation of policies on tourism market development.