The sensitivity of winter tourism to exchange rate changes: Evidence for the Swiss Alps

Abstract

This paper investigates the impact of the appreciation of the Swiss franc on international tourism in Swiss Alpine resorts, city and lake destinations using annual data for winter seasons 2007/2008 to 2010/2011. Using median regression models, we find that the nominal and real appreciation of the Swiss franc has a large and significantly negative impact on international tourism demand in Alpine destinations during winter months. The elasticities of the relative price (to those of competing countries) range between −3.0 for foreign hotel nights and −2.1 for foreign hotel arrivals. In contrast, the real exchange rate effect is much lower in absolute terms for city and lake destinations. The results are not sensitive with respect to different measures of international tourism demand (arrivals, hotel nights and the length of stay). Income elasticities are also significant and large with values of two and higher. In general, these findings are robust to alternative estimation methods (i.e., median regression, robust regression method and ordinary least squares in first differences).