*2.2. International Tourism and Prices Inclusive of Exchange Rates*

The pricing mechanism applies to international tourism. If it becomes more expensive to visit a country, then fewer will travel there. Previous surveys reported a large gap in this effect, depending on the case studied Peng et al. (2015). Peng et al. (2015) found an overall average price elasticity of −1.3 Peng et al. (2015), while Kumar and Kumar (2020) suggested a significantly lower value (around −0.8).

The exchange rate might be a key factor in the demand for tourism. Garín-Muñoza and Montero-Martín (2007) estimated the exchange rate elasticity (of a stronger domestic currency) for international travelers to the Belearic Islands to be −0.76 for the same year and −1.65 for a one-year lag. A limitation of this research was the use of annual data. Hence, they did not capture fluctuations during the year.

Other researchers have reported that a one percent depreciation of the national currency increased the foreign tourist inflow by six percent in Turkey (Agiomirgianakis et al. 2014, 2015) and five percent in Iceland Rannversdóttir and Jóhannsdóttir (2019). There is a wide range of currency elasticities depending on the country of origin and the destination.

In a study of Norwegian hotels, Aalen et al. (2019) estimated the exchange rate elasticity to be around −1.0. In the study of Xie and Tveterås (2020), the elasticity was as high as −6.5 for Chinese tourists and only −0.4 for Japanese tourists. For German visitors, the

estimate was −1.5. Due to the depreciation of the Norwegian currency, Chinese travelers perceive prices to be attractive compared to competing places, and this has resulted in a sharp increase in visitors. However, there is no corresponding effect for Japanese visitors. Although the differences were not as large, Ongan et al. (2017) also reported significant differences depending on the country of origin of European tourists who visited the United States. Vojtko et al. (2018) reported that the foreign tourist response to a one percent appreciation of the national currency varied between 0.22 and 3.26 percent in the Czech Republic and Croatia. Many visitors respond to a higher national currency value by decreasing the lengths of their stay and using less expensive accommodation Fleischer and Rivlin (2009). This effect is more prevalent in high-cost countries. Steller (2017) reported an exchange rate elasticity (of a stronger foreign currency) of 0.74 with a lag of 3–5 months for foreigners visiting Switzerland.
