An Empirical Analysis of the Determinants of International Tourism Demand: The Case of Izmir

Abstract

Tourism has become an important sector in Turkey as a growing source of foreign exchange reserves and employment over the last two decades. After being one of the most important tourist destinations for decades, Izmir lost its relative importance after the 1990s. With its historical, cultural values and nature, Izmir still has a significant potential for tourism. Given the importance of this sector for Izmir, this paper investigates the factors affecting the international tourism demand in Izmir using the time series data between 1980 and 2005. The double logarithmic model is used in estimation. Real exchange rates, the GDP per capita of OECD countries, the GDP per capita of Izmir and the transportation public capital stock of Izmir are the variables used to explain Izmir's international tourist arrivals. The empirical results show that the prices and income of the tourist-generating country are the main determinants of the demand for tourism. Income and price elasticities are above 1. Local factors related to Izmir's level of development and the transportation public capital stock have no significant effect. Policy implications derivable from this study suggest that government should encourage alternative forms of tourism development besides mass tourism.