Tourism and business cycles

This contribution highlights the importance of accounting for variable tourism income elasticities in analyzing business cycles and formulating business strategies. Because demand forecasting is a necessity for tourism management to define efficient business strategies, we point out that approaches with constant elasticity assumptions might lead to substantial forecasting failures. Therefore, in the course of distinct business cycles, we have to take into account that different income effects are to be expected. The contribution uses psychological concepts and financial market aspects to explain asymmetric tourism demand behavior. We emphasize coherently that the integration of psychological factors such as loss aversion and other quality of life aspects as well as economic factors like liquidity constraints, reluctant lending behavior of banks, precautionary saving, changing household behavior and financial innovations delivers an effective framework to explain asymmetric behavior in tourism demand.