Quality and Pricing in Tourist Destinations

Drawing on some recent literature from the field of industrial organisation theory this paper examines the economics of reputation and the quality decisions for a tourism destinantion. The implications of these decisions for competitiveness are also assessed. The analysis shows that whilehigh prices may signal quality, of greater significance is the premium component contained in these prices which serves to minimise the likelihood of quality deterioration. This quality premium is not to be nterpreted as some kind of economic profit. Improvements in information amongst consumers, or in the cost base associated with providing high quality, both help to reduce the size of the premium that is needed to sustain quality.