The price of entry to Venice

This article in The Conversation earlier this week by Sameer Hosany (Royal Holloway University of London) was interesting to me:

Venice’s history, art and architecture attract an estimated 20 million visitors every year. The city, a Unesco World Heritage site, is often crammed with tourists in search of special memories.

But for the people who actually live there, this level of tourism has become unsustainable. So from 2024, day-trippers will be charged a €5 (£4.31) fee as part of an attempt to better manage the flow of visitors.

The city’s mayor has described the charge – which will be implemented on 30 particularly busy days in the spring and summer – as an attempt to “protect the city from mass tourism”.

Will a €5 fee to enter Venice make a difference? Hosany seems skeptical:

But some have expressed doubts about whether the €5 fee – the price of a coffee or an ice cream – will be enough to dissuade tourists from travelling to this iconic ancient city. One city politician commented that the charge means Venice has become “a theme park, a Disneyland,” where “you get in by paying an entrance fee.”

Certainly the charge is a lot less than Bhutan’s (recently reduced) “sustainable development fee” of US$100 (£82) per night, which applies to all tourists, and was introduced to encourage “high value, low impact” tourism. Research also indicates that strategies aiming at persuading tourists to come at less crowded times do not reduce numbers at peak periods, but actually end up increasing overall demand.

Demand curves slope downwards. That means that, when the price of something increases, consumers demand less of it. When the price of a day trip to Venice increases by €5, fewer tourists will go to Venice. The key question isn't whether the fee will deter some tourists, but rather how many tourists will be deterred. That is something that we don't really know, and won't find out until the fee has been implemented. And even then, we don't know for sure what the counterfactual (the number of tourists who would have visited if there hadn't been a fee) is.

However, we can infer from what we know about tourism and the price elasticity of demand, how big an impact the fee will have. As Hosany notes, €5 is the price of a coffee or an ice cream. That is hardly going to be much of a deterrent to a tourist who may have already paid hundreds, or thousands, of dollars to get to Italy in the first place. Tourists' demand for going to Venice is likely to be quite inelastic, because the price of the €5 fee is only a small proportion of the total cost of going to Venice.

So, it would likely take a much larger fee than €5 to deter tourists, especially international tourists, and even more especially tourists from outside Europe. In other words, if the Venetian government are worried about over-tourism, then a €5 fee is unlikely to make much, if any, difference at all. Bhutan has the right idea here, with their fee of US$100 per night. Similarly, the Galapagos Islands charges a national park fee of US$100 for every person visiting the islands (although I think that fee might still be the same as it was when I went there in 2010).

Setting a low fee for entry is not the solution. A better understanding of elasticity would help Venice to better price their entry fee in a way that would actually reduce tourist entries, if that is the goal.