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Net Travel Propensity

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The economic factor such as income, exchange rate, unemployment rate and inflation will be affect the tourism demand either microeconomic or macroeconomic perspectives. Firstly, there will be discussed about the income in influenced the preferences for tourism destination. In the previous study, there were a lot of researcher used a disposable income (also represent as an absolute income from each individual) as a main component in measurement. However, the relative income was neglected in the demand function and few studies had advocated to use relative income as one of the measurement but, there were none of studies use this approach. The difference between disposable income and relative income is the components in each variables as disposable …show more content…

The relationship between income and tourism demand is as the income increase, the tourism demand will also increase as the citizen have more money to spend. Furthermore, the income and travel propensity are related to one another either high or low level of propensity. Travel propensity is general defined as the number of trip taken per population times by hundred. Travel propensity categorized into two which are net travel propensity and gross travel propensity. Net travel propensity is the percentage of overall population who makes at least one trip within a period of time while gross travel propensity is the total number of trip in percentage of population. According to the Yang and Wong (2013), the high disposable income and high propensity to travel among the residents will contribute to the national prosperity in few tourism places, not as overall. …show more content…

The exchange rate have two types – real and nominal exchange rate. Real exchange rate is the rate at which a person can trade the goods and services of one country for the goods and services of another while nominal exchange rate is the rate at which a person can trade the currency of one country for the currency of another. Exchange rate has negative relationship with tourism demand. As the exchange rate in host country low, the foreign tourists and domestic can spend more money in the host country. This situation is called as depreciation where a decrease in the value of a currency (inflation) as measured by the amount of foreign currency it can buy. The vice versa of this situation known as appreciation refers to an increase in the value of a currency as measured by the amount of foreign currency it can buy. Exchange rate and inflation rate are correlated. As the depreciation occur, it will boost up the inflation rate thus the local demand will be high. The cheaper export activities will increases demand for Mongolia exports. Hence, there will be an increasing in local aggregate demand and this is one way of inflation occur – demand

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