Modelling income effects on long and short haul international travel from Japan

Abstract

International travel and tourism are among the most dynamic sectors in the modern economy. The phenomenal growth in international tourist arrivals has significantly outpaced global economic growth over the previous five decades, with particularly strong growth in the Asia and Pacific regions. Among other factors, changes in aircraft technology, economic prosperity and international air service liberalization in the late 1970s have contributed to the growth in the Japanese long haul outbound travel demand. The prolonged economic recession in Japan in the 1990s has changed Japanese outbound tourist preferences for travel to short haul destinations. Income in the origin country is arguably the most widely used explanatory variable in the extant empirical tourism demand literature. This paper examines the dynamic relationship between travel demand and real income in Japan using linear and nonlinear models in order to distinguish between travel demand to Taiwan and New Zealand, which are two short and long haul markets for Japan. The empirical findings that New Zealand has a higher income elasticity of demand as compared with Taiwan should be useful for tourism authorities in developing better informed policies and to manage tourism resources efficiently in destination marketing.