An Econometric Model of Tourism Demand and Room Rates: A Study in Belek, Antalya

Abstract

ABSTRACT In this study, International tourism demand and short-run supply for Antalya-Belek hotel industry are examined via simultaneous equations econometric model using monthly data between 1998-M01 and 2006-M10. The overall goodness-of-flt of both demand and supply models is very high, suggesting a high predictive power. Through empirical Implementation of the theoretical model, several important determinants of supply and demand are identified. On the demand side, “tourist arrivals” is a significant factor driving the demand for beds, while “room rate” has a significant negative impact on the bed demand. At the same time, “bed demand”, “the Consumer Price Index based on real effective exchange rate index”, and “the GAP between bed supply and demand” have a significant positive impact on room rates. Empirical results suggest that the hotel operators in Antalya-Belek attempt to raise the room rates in order to close the gap between actual and expected incomes, when they face high excess gap between the bed supply and demand. Also, yield management is employed by the hotel operators in Antalya-Belek due to the positive impact of the bed demand on room rates.