Modelling and Forecasting the Demand for Thai Tourism

Abstract

This study examines the demand for Thai tourism by seven major origin countries – Australia, Japan, Korea, Singapore, Malaysia, the UK and the USA. The general-to-specific modelling approach is followed in the construction, estimation, testing and selection of the tourism demand models. The empirical results show that habit persistence is the most important factor that influences the demand for Thai tourism by residents from all origin countries. The income, own price, cross price and trade volume variables are also found to be significant in the demand models, but the explanatory power of these variables, judged by the number of times they appear in the models, varies from origin to origin. The Asian financial crisis that occurred in late 1997 and early 1998 also appears to have had a significant impact on tourist arrivals from Singapore, Malaysia, Korea and the UK, but the magnitude and direction of influence are not the same for all models. The models that performed relatively well for each of the origin countries, according to both economic and statistical criteria, are selected to generate ex ante forecasts for the period up to 2010. The results suggest that Korea, Malaysia and Japan are expected to be the largest tourism generating countries by the end of the forecasting period, while the growth rate of tourist arrivals from Korea to Thailand is likely to be the highest among the seven origin countries.