Inbound Australian tourism demand from Asia: a panel gravity model

Abstract

PurposeThis study attempts to explore the determinants of tourism demand that impact tourist arrivals in Australia from Asia using an augmented panel gravity model.Design/methodology/approachThe augmented panel gravity model was utilised to analyse the demand for Australian tourism from 15 major countries of Asia over the period 1991 to 2018. Tourist arrivals were the dependent variable while per capita gross domestic product (GDP) and weighted distance were important explanatory variables. Further other indicators like population, money supply, globalisation, price index, exchange rate, uncertainty and two dummy variables were added as control variables.FindingsThe results demonstrate based on the novel methodology of Pesaran (2006), namely CCE (common correlated effects) that tourist arrivals are impacted positively and significantly by per capita GDP of both the country of origin and destination country, globalisation also impacts tourist flows positively. However, tourist arrivals are adversely affected by distance and prices confirming the economic theory.Originality/valueGravity models have been intensively used in the recent literature on tourism; however, this study has attempted to explore tourism demand from Asia into Australia which is indeed an unexplored area further the study has used the CCE methodology which takes care of the problems of cross-sectional dependence unlike the earlier methods widely used in the literature like the DOLS and the FMOLS. Last by utilising a wide-ranging set of macro factors the study contributes a novel assessment to the recent literature on tourism demand model.