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
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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
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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.
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Model and Statistical
Requirements
Y = f (X1, X2, X3 …..)
Y = aX1 + bX2 + cX3…..
Y is tourism demand
X1, X2, X3….. 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 +
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Variable Measurement
INCOME
origin country personal disposable income - holidays
- VFR
GDP/GNP – business tourism
direction of influence +
Variable Measurement
PRICE
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 – (+)
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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 +
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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 5years-ahead
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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
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www.tourismforecasting.net
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Thank You!
Q&A
Haiyan.Song@inet.polyu.edu.hk
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