The sensitivity of tourism demand to exchange rate changes: an application to Swiss overnight stays in Austrian mountain villages during the winter season

This paper investigates the impact of the depreciation of the euro against the Swiss franc on tourism demand. The data consist of Swiss overnight stays in West Austrian ski resorts during the winter season. Using a panel error correction model, we found that the elasticity of tourism demand with respect to exchange rates is significantly larger than unity in absolute terms. In particular, the real exchange rate elasticity ranges between ?1.5 using the dynamic panel data model and ?2.2 for the long difference regression model. This indicates that Swiss winter tourists are highly sensitive to changes in exchange rates and relative prices. High elevation ski resorts benefit most from the depreciation of the euro against the Swiss franc. For Austrian ski resorts, tentative estimates suggest that the depreciation of the euro against the Swiss franc has led to an additional 173,000 overnight stays over the last four winter seasons.