Tourism demand response by residents of Latin American countries

Abstract

AbstractA general‐to‐specific methodology was used to build international tourism demand models by residents from Argentina, Brazil, Colombia and Venezuela to Aruba. We seek to evaluate demand parameters, especially elasticity values, which were disaggregated on a country‐to‐country basis. We also aim to learn more about the structure and important variables and investigate the process of adjustment. The study has provided new and compelling evidence that, in the short run, residents in developing countries respond rationally and substantially to economic stimulus. The short‐run income elasticity ranges from the low of 1.52 for Venezuela to the high of 2.34 for Argentina. These results indicate that Aruba will benefit differently from income increases in these four Latin American countries. The coefficients of the price variable had the expected negative signs, inelastic in the short‐run for all countries but significant at the 5% level for Venezuela only. Any deliberate effort to expand tourist arrivals will require a much larger decline in prices than would be the case in the presence of short‐run elastic response. The adjustment elasticity, being less than one, suggests that a period of more than one year is required for Latin American residents to fully adjust their tourism decisions in response to demand shocks. This study would seem to provide some useful information about international tourism demand from developing to developing countries that could form a very good and solid basis for analyses and policy action. Copyright © 2008 John Wiley & Sons, Ltd.