The Gravity Model of Tourism Demand in the Philippines

Abstract

This study has empirically examined the validity of gravity theorem in the context of international tourism demand in the Philippines. There is a growing trend of tourist arrivals in the Philippines and the benefits that the country gained from the tourism sector is increasing. The factors that explain these trends are therefore important to be fully understood given the significant contribution of the tourism sector in the socio-economic growth of the country. In this study, a panel data was set-up through statistical software consisting of 27 time-series set from 1991-2017 with the top 20 countries visiting the Philippines. Estimates from the random effects model show that gross domestic product, direct flights, common colonizers, population and distance have significantly affected tourism inflows in the Philippines over time. Results from both the classical and augmented gravity models conform to the prediction of gravity theorem that inflows of tourists in the Philippines are coming from countries with larger GDP and coming from countries that are closer in distance from the Philippines. Based on the results, the Philippines has to establish more direct flights with the identified origin countries of the tourists to increase international tourism demand and to further enhance the tourism sector’s contribution to the country’s economic growth.