Tourism Demand Forecasting and Its Requirements for Statistics Prof. Haiyan Song School of Hotel and Tourism Management The Hong Kong Polytechnic University Why Accurate forecasts of tourism demand are essential for efficient planning by tourismrelated businesses Prediction of long-term demand for tourism related infrastructure often forms an important part of investment project appraisal Accurate forecasts of demand in the tourism sector of the economy will help destination governments in formulating and implementing appropriate medium-long term tourism strategies 1
Why organizations have tended to become more complex and so have their environments organizations have moved towards more systematic decision making that involves explicit justification for individual actions Who Tourism marketers Set marketing goals Explore potential markets Tourism managers Determine operational requirements Study project feasibility Tourism planners and public agencies Predict the economic, social/cultural and environmental consequences Ensure adequate capacity and infrastructure 2
How We are going to focus on causal quantitative forecasting. This involves estimating the relationship between international tourism demand and each of influencing factors. Use estimated relationship in conjunction with forecasts of influencing factors to generate international tourism demand forecasts. How Econometric models can be used to identify size of effects that changes in influencing factors have on tourism demand. May therefore be used for what if forecasting where consequences of possible changes in influencing factors can be assessed. 3
Model and Statistical Requirements Y = f (X 1, X 2, X 3..) Y = ax 1 + bx 2 + cx 3.. Y is tourism demand X 1, X 2, X 3.. are the explanatory variables (influencing factors) a, b, c,.. are parameters or elasticities if the variables are measured in logarithm Evaluate signs of parameter estimates to see if theoretically meaningful. Incorrect sign = theoretically implausible Variable Measurement POPULATION origin country direction of influence + 4
Variable Measurement INCOME origin country - personal disposable income - holidays -VFR GDP/GNP business tourism direction of influence + PRICE Variable Measurement 2 elements - cost of travel to destination - cost of living for tourists in destination cost of travel - air fare - petrol cost of living - specific for tourists - consumer price index proxy - exchange rates direction of influence (+) 5
Variable Measurement SUBSTITUTE PRICES holidays - very important VFR - less important but may substitute holiday business - not important substitute travel costs } weighted averages substitute living costs } based on market shares direction of influence + Variable Measurement PROMOTIONAL ACTIVITY NTO promotional expenditure - destination specific - media advertising - public relations problems - impact distributed over time - effectiveness may vary across media direction of influence + 6
Variable Measurement ONE-OFF EVENTS Impact can be allowed for by using DUMMY VARIABLES war terrorist activity/threats foreign currency restrictions health scares, etc. direction of influence Olympic Games Expo, etc. direction of influence + Tourism Demand Forecasting System (TDFS) for Hong Kong The main aim of the TDFS for Hong Kong is to provide forecasts based on economic theory that postulates the relationship between the demand for Hong Kong tourism and its influencing factors. The specific forecasting outputs of the system include quarterly forecasts of: tourist arrivals by source markets up to 10-years-ahead tourist expenditures by source market up to 10-years-ahead demand for hotel rooms by source markets and by room types up to 5-years-ahead tourist expenditure on accommodation, retail products, restaurant meals and transportation by source markets up to 5- years-ahead 7
Tourism Demand Forecasting System (TDFS) for Hong Kong The TDFS will provide a useful source of information for the following stakeholders: Government offices responsible for tourism policymaking and implementation Business executives in the travel, hotel, catering, retail and other tourism-related sectors Planning and marketing agencies/departments of the various tourism sectors in Hong Kong Consultancy firms focusing on tourism Education and research establishments focusing on tourism 8
9
10
11
www.tourismforecasting.net 12
Thank You! Q&A Haiyan.Song@inet.polyu.edu.hk 13