The Determinants of Tourism Demand in South Africa Using a Dynamic Panel Data Approach

Abstract

This article models inbound tourism demand for South Africa using a theoretical framework that is based on the gravity model and provides elasticity estimates that are useful for policy purposes. It uses a well-established gravity model following Anderson and van Wincoop's model (2003) to explain tourism flows. The article departs from most of the existing work estimating tourism demand and builds on the recent work of Durbarry, but employs a dynamic panel data setting. The results show that tourists are not too sensitive to changes in the tourism price of South Africa, indicating that it offers a unique product and experience to tourists. In fact, evidence tends to suggest that competing destinations may imploy tourism products that are unique to their destinations in the region. The level of development and tourism infrastructure also affect arrivals. It is also found that distance negatively affects arrivals, but common border and language play an important role. The dynamic model supports the presence of repeat tourism and positive word-of-mouth, particularly from European and American origins.