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Journal of Travel Research
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Tourism Demand Forecasting: A Time Varying Parameter Error Correction Model

Gang Li

School of Management, University of Surrey, United Kingdom

Kevin K. F. Wong

School of Hotel and Tourism Management, Hong Kong Polytechnic University, Hong Kong

Haiyan Song

School of Hotel and Tourism Management, Hong Kong Polytechnic University, Hong Kong

Stephen F. Witt

School of Hotel and Tourism Management, Hong Kong Polytechnic University, Hong Kong, University of Surrey, United Kingdom

The advantages of error correction models (ECMs) and time varying parameter (TVP) models have been discussed in the tourism forecasting literature. These models are now combined to give a new single-equation model, the time varying parameter error correction model (TVP-ECM), which is applied for the first time in the context of tourism demand forecasting. The empirical study focuses on tourism demand, measured by tourism spending per capita, by U.K. residents for five key Western European destinations. The empirical results show that the TVP-ECM can be expected to outperform a number of alternative econometric and time-series models in forecasting the demand for tourism, especially in forecasting the growth rate of tourism demand. A practical implication of this result is that the TVP-ECM approach should be used when forecasting tourism growth is concerned.

Key Words: time-varying parameter • error correction model • tourism demand • ex post forecasting • Kalman filter

Journal of Travel Research, Vol. 45, No. 2, 175-185 (2006)
DOI: 10.1177/0047287506291596
Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us   Add to Digg Digg   Add to Reddit Reddit   Add to Technorati Technorati    What's this?