Price and Expenditure Elasticities of Demand for Domestic Tourism in Iran: The Case of Hamedan Province1

Domestic tourism has an important role in socio-economic development in several ways including creating jobs and improving income distribution. Although several researcheshave been done on tourism demand, a small proportion of them have been on domestic tourism. In this paper, the price and expenditure elasticities of the household demand for domestic tourism in Iran, focusing on the case of Hamedan Province, are estimated by the Almost Ideal Demand System (AIDS) model. The data set used is of a cross-section type and has been collected from Hamedan tourists regarding their domestic trips.This data set includes 504 domestic tourist households that their trips last at least one overnight in Hamedan province in summer of 2003. The expenditure elasticity results for food, accommodation, transportation, visit fees (entrance fees to enter the points of interest), and souvenirs commodity groups are estimated by about 1.34, 1.32, 1.47, 0.36 and 0.47, respectively, and for total trip to provinces were close to one. The price elasticities of demand for the five commodity groups and for total trips to provinces are less than one. This implies that an increase in the total budget of the household yearly trips would be allocated by a smaller proportion to Hamedan trip as compared to other provinces. Another implication is that an increase in the price of visit fees, for example, can increase the total receipts to compensate the high costs of repair and maintenance of the valuable points of interest