Academic journal article International Journal of Management and Marketing Research

Inbound International Tourism to the United States: A Panel Data Analysis

Academic journal article International Journal of Management and Marketing Research

Inbound International Tourism to the United States: A Panel Data Analysis

Article excerpt

ABSTRACT

The objective of this paper is to analyze the demand for tourist arrivals to the United States, using the panel cointegration technique. The study attempts to identify and measure the impact of the main determinants of inbound international tourism flows to the United States. The study uses annual data from 1986 to 2011 for tourist arrivals from 50 major countries of tourist origin. The specified model includes several country-specific determinants. The panel unit root tests indicate all the variables are integrated of order one. The panel cointegration tests show that all seven test statistics reject the null hypothesis of no cointegration at the 1% significance level, indicating that the five variables are cointegrated. The results suggest that tourism demand to the United States must be considered as a luxury good and is highly dependent on the evolution of relative prices and cost of travel between origin and destination country. The results also show that tourism demand is elastic with respect to income but inelastic with respect to tourism price, real exchange rate, and travel costs.

JEL: L83, 051

KEYWORDS: Tourism demand, Panel data, Panel cointegration, United States

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

The Tourism industry has emerged as one of the leading service industries in the global economy, as well as in the United States economy in recent decades. Economic flows, generated by international tourism, have become vital factors in economic growth and international economic relations in many countries. Tourism, is now one of the largest foreign exchange earners in the United States, generating $434.4 billion or 2.9% of GDP in 2011 (World Travel and Tourism Council, 2012). indeed, a major source of economic and employment growth. For example, according to the U.S. Bureau of Economic Analysis, direct tourism employment in the United States was 5.41 million and a total tourism-related employment of 7.63 million in 2011, accounting for about 5.5% of total employment. According to the U.S. Department of Commerce, Office of Travel and Tourism Industries, between 1986 and 201 1, international tourist arrivals to the United States increased from 25.7 million to 63.2 million, growing an annual average growth rate of 3.5% (see Table 1). Based on the latest forecast by the U.S. Department of Commerce, the United States is expected to see a 5% annual growth rate in visitor volume between 2012 and 2016, producing 81 .5 million visitors by 2016.

Given the importance of the travel and tourism industry to the United States, Congress introduced the Travel Promotion Act of 2009 (TP A) authorizing the creation of a public-private partnership, and the establishment of a new non-profit Corporation for Travel Promotion (CTP) to further promote tourism. The CTP' s main goal is to promote the United States as a premier travel destination to international travelers. According to the U.S. Department of Commerce press release on President Obama's signing the TPA Act into law, in March 2010, each year "oversees visitors spend an average of $4,500 per person." The Department forecasts that the TPA will "generate $4 billion in new visitor spending and 4,000 new jobs. However, the impacts are expected to be minimal in 2012 and increase as a proportion of normal expected growth through 2014 and then decline through 2016.

North America has been the largest source of tourist arrivals to the United States during the period 19902011, although its share dropped from 61.7% in 1990 to 49.3% in 2000 (see Table 2). The three largest regions of tourist arrivals, North America, Western Europe, and Asia, account for more than 85% of total tourist arrivals to the United States. Regions such as Eastern Europe and Africa record the lowest number of tourists to the United States between 1990 and 201 1. Canada, Mexico, and the United Kingdom are the three largest sources of tourists to the United States, accounting for more than 61% of total international visitors in 2011 (see Table 3). …

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