Abstract
This paper models tourism demand for South Africa from the UK and the USA, using an almost ideal demand system. An error-correction almost ideal demand system (EC-AIDS) is applied to quantify the responsiveness of UK and USA tourism demand for South Africa, relative to changes in tourism prices and expenditure or income. Short-term own-price, cross-price and expenditure elasticities are derived from the EC-AIDS models. One of the key findings of the paper is that tourism from the UK and USA is not sensitive to price changes in South Africa in the short term. Tourism to South Africa is found to be more income-elastic than price-elastic, indicating that the country is vulnerable to changing world economic conditions. Even though price competitiveness does not yet seem to be a key concern, significant substitution effects are present, with especially Spain and Malaysia benefiting from a decline in South Africa’s price competitiveness.
Highlights
In recent times, tourism has become a very important sector in countries’ economies – partly due to the impact of tourism on a country’s gross domestic product (GDP) and the employment opportunities that tourism can offer
The worldwide figures over the past few years make for interesting reading, i.e. from 2005 to 2007 international tourist arrivals grew by 9%, from 800 million to 900 million, according to the World Trade & Tourism Council (WTTC) Report of 2010
This study takes its place among a few other studies that have dealt with tourism demand for South Africa, and is important in understanding how tourism demand is affected, especially in a developing country that places so much emphasis on tourism
Summary
Tourism has become a very important sector in countries’ economies – partly due to the impact of tourism on a country’s gross domestic product (GDP) and the employment opportunities that tourism can offer. Many countries view tourism as a means to increase income, generate foreign currency, create employment and increase revenues from taxes. The worldwide figures over the past few years make for interesting reading, i.e. from 2005 to 2007 international tourist arrivals grew by 9%, from 800 million to 900 million, according to the World Trade & Tourism Council (WTTC) Report of 2010. The global tourism industry suffered because of tourists’ reluctance to travel due to tighter budgets and lack of disposable income. According to the WTTC summary of the Tourism industry in 2010 (WTTC, 2010), the recession of 2009 effected a drop of 2.1% in real world GDP. The recession mainly affected developed countries, which are the most important source for travel and tourism demand, and tourist arrivals declined by 877 million in 2009
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