Tourism demand modelling and forecasting: Modern econometric approaches

Tourism demand is the foundation on which all tourism-related business decisions ultimately rest. Companies such as airlines, tour operators, hotels, cruise ship lines, and many recreation facility providers and shop owners are interested in the demand for their products by tourists. The success of many businesses depends largely or totally on the state of tourism demand, and ultimate management failure is quite often due to the failure to meet market demand. Because of the key role of demand as a determinant of business profitability, estimates of expected future demand constitute a very important element in all planning activities. It is clear that accurate forecasts of tourism demand are essential for efficient planning by tourism-related businesses, particularly given the perishability of the tourism product. For example, it is impossible for an airline to recoup the potential revenue lost by a flight taking off with empty seats. The loss resulting from these unsold seats contrasts with the case of, say, a car manufacturer, where if a car does not sell on a particular day it can still be sold subsequently.