New Insights into ECCU's Tourism Sector Competitiveness

Author/Editor:

Manuk Ghazanchyan ; Li Zhao ; Steve Brito ; Vivian Parlak

Publication Date:

July 17, 2019

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

Tourism has become the main driver of economic growth and employment and the most important source of income in the ECCU. Preserving and, possibly, enhancing the competitiveness of the tourism product is key for these countries. Unfortunately, the evidence shows that tourism arrivals to the ECCU have been declining slightly while global demand for tourism is on the rise. The objective of this paper is to study the structural determinants of competitiveness for the ECCU, defined as the relative cost advantage over other touristic regions (Di Bella, Lewis, and Martin 2007). Using a gravity model, we show that proximity to North American and European markets is indeed an important competitive advantage for the ECCU. However, despite this advantage, and, in some cases, specialization in high-end tourism, regression analysis shows that arrivals to the ECCU are sensitive to relative prices. Our simulations show that mitigating supply-side constraints would improve the ECCU’s competitiveness and allow the region to regain global market shares.

Series:

Working Paper No. 19/154

Subject:

English

Publication Date:

July 17, 2019

ISBN/ISSN:

9781498320818/1018-5941

Stock No:

WPIEA2019154

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

18

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