This thesis explores how tourism policy, if based on evidence, can contribute to the objective of destination competitiveness. Evidence-based policy-making is informed by high-quality research formulated using rigorous, scientific methods. The thesis aims to show that policy analysis applied to the macro and micro levels can create evidence for use in policy formulation. The research is set within the Mediterranean context, with particular emphasis on Malta’s competitiveness within the inclusive tour holiday market originating from the United Kingdom. Using economic theory and econometrics, the thesis demonstrates the potential usefulness of econometric modelling in conducting such policy analysis. This is done by firstly estimating the effect of the Maltese government’s policy to subsidise tour operators on a set of destinations’ price and income elasticities, given that elasticities are deemed to be a good measure of destination competitiveness. These estimates are carried out through the application of the Almost Ideal Demand System model. Secondly, the price competitiveness of inclusive tour holidays is examined by applying the characteristics theory of value and the hedonic pricing model. The effect on package prices of inclusive tour holiday characteristics and of macroeconomic variables, including destinations’ relative prices, is quantified. The effect of the subsidisation policy is also estimated. The policy analysis results are then interpreted against the destination competitiveness frameworks. The implications for government policies and those of firms are discussed in relation to how destination competitiveness in the inclusive tour holiday market can accordingly be achieved through evidence-based policies. The findings clearly indicate that destinations can benefit significantly in terms of competitiveness by adopting an evidence-based approach to tourism policy-making. It is shown that government and the private sector have a key role to play for destinations to achieve competitiveness through the policies they adopt, highlighting the importance of informed and strategic approaches to governance.