Digital Platforms and the Demand for International Tourism Services

Abstract

Tourism is an important source of foreign exchange and employment across developing economies. A scant literature has explored the relationship between tourism and the advent of the internet. This paper contributes to the tourism-trade literature and studies the empirical relationship between international tourism and the adoption of digital technologies that facilitate search about tourism opportunities across countries. It links foreign visits with the spread of the use of the internet in sending countries and the level of development of business-to-consumer digital tools in host countries. The paper estimates a well-specified gravity model of tourist arrivals between country pairs with panel data. The results indicate that frictions affecting bilateral tourism flows have been attenuated by the advent of digital tools. The absolute value of the effects of bilateral geographic distance, language differences, and border-contiguity seem to be reduced by the use of the internet by potential tourists and the business sector in host countries. The results are robust to alternative proxies for internet use for tourism search proxied by data from Google trends. The paper also presents simulations of the potential impacts of advances in the adoption of digital tools over time, linking the adoption process to mechanisms of technology adoption that are commonplace in the literature.