Foreign Tourism in Andalusia: A Dynamic Panel Data Analysis

Abstract

This paper studies the main determinants of the inbound international tourism in Andalusia and quantify its incidence. Based on the classical theoretical framework for tourism demand, we incorporate dynamics into the model by adding the lagged dependent variable as an explanatory variable, along with the per capita income of the tourist's country of origin, the relative prices between the origin and destination countries and the cost of travel. The empirical model is applied to a panel data set consisting of 21 countries of origin of the tourists for the period 2008-2018. Data were collected from the Hotel Occupancy Survey (HOS), published by the National Statistics Institute of Spain (INE).The results have been obtained using the GMM-DIFF estimator of Arellano and Bond.The parameters estimated reflect a high level of consumer loyalty and the importance of the word-of-mouth effect. Moreover, the income elasticity indicates that the demand for tourism in Andalusia may be considered as a luxury good. Prices have a negative relationship with tourism demand. The cost of travel, which has a negative effect, is statistically significant to explain the number of tourists' arrivals and, however, it is not significant for the overnight stays model.