Spain as a Tourism Destination for British Residents: An Empirical Model for Visitors in Hotels

Abstract:     
Since the United Kingdom has traditionally been one of the most important sources of tourism for Spain, an in-depth knowledge of the main determinants of the demand may be useful for policy-makers and agents of the industry. In this paper, a dynamic model is used to examine British demand for tourism in Spain. The proposed model is applied to a panel data set consisting of inbound British tourism in each of the 17 administrative regions (Autonomous Communities) for the ten-year period 1999-2008.

The selected model provides us with the short- and long-run elasticities for the variables of interest. One of the most relevant results of the study is that long-run elasticities are always larger than their corresponding short-run elasticities. Tourists are more flexible in response to price and income changes in the long term than in the short run. Reasons such as habit persistence, adjustment costs, imperfect information, incorrect expectations and misinterpreted real price changes often prevent consumers from adjusting their consumption instantly to price and income changes.

The results also indicate that the demand for tourism in Spain is a luxury for the British and highly dependent on the evolution of relative prices and cost of travel between the United Kingdom and the destination. These results suggest that diversification of promotion and provision of high-quality services are some recommended measures of tourism policy.

Number of Pages in PDF File: 22

Keywords: Tourism demand, dynamic model, GMM estimators, short- and long-run elasticities, consumer loyalty, word of mouth effect, low cost carriers

JEL Classification: B21, B23, L83

working papers series