International Tourism Demand: Switzerland vs. Cambodia Analysis

Tourism Demand: Definition and Scope

Tourism may be defined as "the sum of the phenomena and relationships arising from the interaction of tourists, business suppliers, host governments, and host communities in the process of attracting and hosting these tourists and other visitors" (McIntosh & Goeldner, 1990, p. 4).

From this definition, it is clear that the development of tourism in any area involves multiple players. Tourism is also made up of numerous activities, services, and industries that contribute to the tourist experience. These include the provision of transportation and accommodation, eating and drinking establishments, entertainment facilities, and retail shops, among others (McIntosh & Goeldner, 1990). Edgell (1990, p. 12) elaborates:

"The full scope of international travel and tourism, therefore, encompasses the output of segments of many industries. The travel 'industry' consumes the output of and creates a far-reaching base of wealth for feeder industries such as agriculture, fishing, food processing, brewing, construction, airports, automobiles, and furniture. In addition, tourist activities make use of the services of other industries such as insurance, credit cards, advertising, and data processing."

The tourism industry is therefore not a stand-alone industry, but one whose relations cut across industry, product, and service lines. This has significant implications when considering the impacts of tourism on a host country.

In much of the current literature, tourism development is usually linked to the activities of developing countries. However, Roche (1992, p. 566) observed that while the development of tourism has been viewed as a symbol of "westernization" and progress, particularly in developing countries, its "role as both a symbol and vehicle of economic and socio-cultural change and 'modernization' is potentially just as significant for the advanced industrial countries."

The key challenge in measuring tourism's impacts on an economy is that tourism is part of many different industries but comprises 100% of no single industry (Global Insights, 2003). Conventionally, tourism has been measured from the demand side, reflecting the amount of expenditure made by visitors to local areas. Other economic sectors have traditionally been measured from the supply side, looking at production inputs and outputs to determine their effect on the overall economy. This has made comparison difficult.

There have been a number of attempts to bring tourism measurement in line with other industry measurements internationally. The most common form of economic impact measurement is the input/output model (I/O), which looks only at the products and services produced by tourist sectors and how this production impacts the regional economy. It does not take into account tourism spending patterns, only the production of commodities by industries assigned to tourism sectors. The next step was the development of the Tourism Satellite Account (TSA), which incorporates demand in the form of tourism expenditures when assessing impacts. The final approach is computable general equilibrium modeling (CGE), including tourism policy and forecasting models. Each model is a step closer to comprehensively assessing the true impacts of tourism on local economies, and each is based on adjustments to previous models.

Edgell reports that in 1989, there were 403 million international tourist arrivals worldwide, and that international tourist receipts exceeded U.S. $208 billion. According to the World Tourism Organization's (WTO) Tourism Highlights 2006 Edition, the total number of worldwide international tourist arrivals in 2005 was 806 million. Given the wars, natural disasters, and terrorist activities that occurred between 1989 and 2005, this doubling in the scale of tourism is highly significant. Total international tourist receipts in 2005 tripled to U.S. $680 billion.

Looking at international tourist arrivals by region in 2005, Europe led with 441.5 million, followed by Asia and the Pacific (155.4 million), the Americas (133.5 million), the Middle East (39.1 million), and Africa (36.7 million). The ranking of international tourist receipts followed a similar pattern, with Europe receiving more than half (U.S. $348.2 billion) and Africa bringing up the rear with U.S. $21.5 billion. While these figures do not detail individual country totals, it is clear that the distribution of both arrivals and receipts is skewed among global regions.

Tourism is a complex phenomenon studied by disciplines including economics, psychology, sociology, marketing, geography, and political science (Lundberg, Krishnamoorthy, & Stavenga, 1995; Przeclawski, 1993). Consequently, each discipline has provided a partial rather than holistic view of the factors that influence tourism activities, including the choice of destinations and expenditure patterns (Song & Wong, 2003).

International Tourism Demand Estimation Methods

Depending on the objectives and circumstances of a study, various functional forms have been used in empirical international tourism demand research. Until the mid-1980s, most studies adopted a causal econometric approach represented by the single-equation method, either in a linear or power equation format (Barry & O'Hagan, 1972; Gray, 1966; Stronge & Redman, 1982).

As new economic theory and econometric methods developed, tourism researchers applied those techniques in an attempt to construct an international tourism demand model that would include the most appropriate variables and yield significant estimation results. Since the introduction of the Almost Ideal Demand System (AIDS) method (Deaton & Muellbauer, 1980b), tourism researchers and applied economists have adopted the AIDS method to analyze international tourism demand, particularly in regions where many competing destinations adjoin each other.

Over sixty percent of previous international tourism demand studies have adopted the number of international tourist visitations or arrivals as the measure of demand (Crouch, 1994). Both tourist arrivals and tourism expenditure, however, have their own limitations. Song and Witt (2000) noted that tourist visitation data are collected via frontier counts or registration at accommodation establishments, but this procedure does not account for day-trippers or visitors staying with friends and relatives, especially when the data rely on lodging facility records.

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