Using a consumer choice model to explain the effect of the newly developed oxford COVID-19 government stringency measure on hotel occupancy rates.

Abstract

In response to the unexpected outbreak of the novel coronavirus (COVID-19), governments worldwide implemented stringent measures to contain its transmission. This study investigates the effect of the stringency of COVID-19 outbreak government measures on hotel occupancy rates in the world’s top ten visitor destination countries. The analysis in this study draws upon the recently developed novel indicator, government stringency, compiled systematically by the Oxford COVID-19 Government Response Tracker for March 2020 to March 2021. By adopting a structural consumer choice model, the panel estimation procedure is applied to assess the effect of government stringency on hotel occupancy rates. The findings revealed a statistically significant adverse effect of government stringency on hotel occupancy rates. The findings suggest that although government containment measures had the desired effect of reducing transmissions of COVID-19 and a crucial predictor of hotel occupancy rates in the top ten tourist destination countries, it adversely impacted the tourism hospitality sector through reduced demand for hotel accommodation as occupancy rates plunged. This study's analysis supports the consumer choice modelling approach as it can be considered a relevant analytical framework that is satisfactorily able to explain the adverse effects of governments containment measures on hotel occupancy rates. This research contributes to the tourism modelling literature and complements previous studies in providing an additional understanding of the effect of government stringency measures based on the newly established Oxford COVID-19 Government Response Tracker Database within a coherent modelling framework.