Estimating Demand Elasticities for Australia's International Outbound Tourism

Abstract

In spite of the vast and growing literature on tourism demand, outbound tourism remains relatively under-researched. This paper highlights the usefulness of examining determinants of outbound tourism and develops a comprehensive dynamic demand model for international travel from Australia using the panel data cointegration technique. The data represent 47 destinations for the period 1991–2008. The aim is to compute robust demand elasticities. One of the contributions of the paper is that it demonstrates the role immigration plays in determining international tourist departures from Australia. The estimated short-run and long-run immigration elasticities are 0.2 and 0.6, respectively.

Migration and outbound tourism: Evidence from Italy

“…The outcomes for the lagged dependent variable show that past destination choices explain a remarkable proportion of present outbound tourist trips: an increase of 10% in past outbound trips will lead to an increase of 8.1% in current trips to a specific destination. This result is slightly higher than that reported by Seetaram (2012b) for total departures (about 0.7). The habit-persistence and word-of-mouth effects weaken when the different groups of tourists are considered separately.…”

“…Within this strand of literature, interesting recent works are Seetaram & Dwyer (2009), Tadesse & White (2012), Leitão & Shahbaz (2012), Seetaram (2012a;2012b);Genç (2013) and Massidda & Piras (2013) Dwyer (2009) andSeetaram (2012a;2012b) find strong support for a positive link between the stock of foreign-born people living in Australia and tourism flows. In particular, Seetaram & Dwyer (2009) and Seetaram (2012a) concentrate on inbound tourism demand, whereas Seetaram (2012b) focuses on outbound tourist flows. The existence of the tourism-migration nexus is also demonstrated for the USA by Tadesse & White (2012) who find a positive impact of the stock of foreign-born people living in the USA on the number of total arrivals.…”

“…Furthermore, the results are only partially comparable with the empirical literature. In fact, only three studies analyze the relationship between outbound tourism and the stock of immigrants, namely Dwyer et al (2010), Seetaram (2012b) and Law et al (2013). Only Dwyer et al (2010) and Law et al (2013), analyze different segments of tourism demand.…”

Is the migration-tourism relationship only about VFR?

“…According to Song and Li (2008), the use of real exchange rates is a commonplace proxy for the prices used in tourism demand modeling. However, Smith and Toms (1978), Philips and Hamal (2000) and Seetaram (2012b) have expressed doubts about whether real exchange rates are a good proxy for prices in tourism demand models. Seetaram (2012b) argues that this variable does not capture the price effect of demand accurately, particularly in the modelling of outbound tourism this may occur as a result of strong collinearity between income and exchange rate when the data that is being used is derived from an open economy.…”

“…These researchers used regression analysis to show that the proportion of the Australian population who have been born in a particular overseas country is a significant determinant of demand for both inbound and outbound leisure tourism. The market segments that the respective authors used in their studies, namely business and leisure tourism, each included a VFR dimension.Recently, Seetaram and Dwyer (2009) and Seetaram (2012aSeetaram ( , 2012b) used a more sophisticated panel data technique to show that immigration influences total inbound tourism to and outbound tourism from Australia. The estimated short term and long term elasticities for international arrivals were 0.03 and 0.09 respectively, while the equivalent short term and long term elasticities for outbound departures were 0.189 and 0.63.These elasticities are high enough to conclude that the level of migration stocks in Australia is an important determinant of inbound tourism and particularly for outbound tourism.…”