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Modeling Tourism Demand: A Dynamic Linear AIDS Approach

School of Management, University of Surrey, United Kingdom

Haiyan Song

School of Hotel and Tourism Management, The Hong Kong Polytechnic University, Hong Kong SAR, P. R. China

Stephen F. Witt

School of Management, University of Surrey, United Kingdom

The linear almost ideal demand system (LAIDS), in both static and dynamic forms, is examined in the context of international tourism demand. The superiority of the dynamic error correction LAIDS compared to its static counterpart is demonstrated in terms of both the acceptability of theoretical restrictions and forecasting accuracy, using a data set on the expenditure of U.K. tourists in 22 Western European countries. Both long-run and short-run demand elasticities are calculated. The expenditure elasticities show that traveling to most major destinations in Western Europe appears to be a luxury for U.K. tourists in the long run. The demand for travel to these destinations by U.K. tourists is also likely to be more price elastic in the long run than in the short run. The calculated cross-price elasticities suggest that the substitution/complementarity effects vary from destination to destination.

Key Words: tourism demand • linear almost ideal demand system (LAIDS) • error correction • demand elasticity • forecasting

Journal of Travel Research, Vol. 43, No. 2, 141-150 (2004)
DOI: 10.1177/0047287504268235


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