Pricing Policies for Sustainable Growth and Development Led by Tourism in the Region of Western Macedonia

Abstract

In this paper , we estimate expenditure elasticities of the main spending categories of domestic tourists visiting the region of Western Macedonia, Greece with the purpose of establish ing sustainable growth and development pricing policies from the actors of the region. An Almost Ideal Demand System (AIDS) model is developed and estimated with data collected by field survey. Our analysis shows that hotel entrepreneurs should adjust their pricing policy in periods with large changes in prices. Also, food expenditure is not consi dered as an important category in the tourists’ preferences, showing some flexibility since in the case of an increase in the price of museum services, tourists could balance it out by a reduction in their spending share of food. O n the contrary of this, in case of a price increase in the museum services, tourists are not will ing to reduce their consumption of these services rather they prefer t o com pensate for this increase by a reduction in their expenses for souvenirs . Moreover, our findings suggest that if the price of museums and the price of souvenirs would increase , the share of this category could be reduced. These find ings have certain policy implications for hotel owners/managers, for restaurants and taverns of the region, as well as, for the Ministry of Culture i n setting their pricing policies. The methodology developed in this study and the adaptation of the AIDS model to examine tourists’ expenditure patterns with primar y survey data can be used by other studies for other regions of Greece or any other country.