Investigating other leading indicators influencing Australian domestic tourism demand

Abstract

In the tourism demand literature, much of the research focuses on income and price variables as demand determinants for travel. Nevertheless, the literature has neglected other possible indicators such as consumers' perceptions of the future course of the economy, household debt and the number of hours worked in paid jobs. In fact, several studies found that these indicators could influence consumers in making decisions to travel. In this paper, we examine whether there are other indicators that can influence future Australian domestic tourism demand. The econometric model used in this study is a panel three-stage least squares (3SLS) model. Using the data on Australian domestic tourism demand, the empirical results reveal several points: first, it is found that the consumer sentiment index has significant impacts on VFR, but not on holiday tourism. Furthermore, the business confidence index has no influence on business tourism demand.The study also finds that an increase in household debt could encourage more Australians to travel domestically, indicating that Australians may consider increasing debt as their confidence to spend increases. Lastly, working hours have a statistically significant effect in the case of holiday tourism data.

Sentiment, mood and outbound tourism demand

“…Indeed, they find this index to be an effective short-term predictor for the US domestic travel volume. Later studies report similar findings when using household debt as a proxy for consumer confidence in relation to Australian domestic tourism demand (Athanasopoulos & Hyndman, 2008;Yap & Allen, 2011).…”

“…By contrast, there is little empirical work on how variables that move beyond the macroeconomic sphere, such as people's mood and sentiment, might impact on their propensity to consume tourism products (Yap & Allen, 2011). The role of mood and sentiment in individuals' spending behavior has been widely examined in the economics and psychology literature (Nofsinger, 2005;Weber & Johnson, 2009) and is acknowledged as an important determinant of many economic aspects, ranging from consumer expenditure (Carroll, Fuhrer, & Wilcox, 1994;Ludvigson, 2004) to stock market returns (Baker & Wurgler, 2006).…”

“…The role of mood and sentiment in individuals' spending behavior has been widely examined in the economics and psychology literature (Nofsinger, 2005;Weber & Johnson, 2009) and is acknowledged as an important determinant of many economic aspects, ranging from consumer expenditure (Carroll, Fuhrer, & Wilcox, 1994;Ludvigson, 2004) to stock market returns (Baker & Wurgler, 2006). Tourism studies offer some evidence that consumer sentiment and mood relate to national tourism demand (Yap & Allen, 2011) and the way tourists evaluate hospitality services (Sirakaya, Petrick, & Choi, 2004). Motivated by this line of research, this paper investigates the spillover effects of shocks to mood and sentiment on US outbound tourism to all destinations.…”

“…Unlike previous studies (e.g. Yap & Allen, 2011), we investigate the spillover effects of shocks to consumer sentiment, mood and outbound tourism demand using three different proxies. With the exception of the ICS, the other two proxies are used in the tourism literature for the first time.…”

“…Additionally, the manner of the ICS inclusion represents a significant departure from the literature. Instead of employing the ICS as a determinant of either tourism demand at a national level (Crotts, Thunberg & Shifflet, 1993;Yap & Allen, 2011) or international tourism arrivals in destination countries (Gounopoulos, Petmezas, & Santamaria, 2012), we use it as a sentiment proxy to investigate its spillover effects on the aggregate US outbound tourism demand.…”