Determinants of tourism demand in Indonesia :: A panel data analysis

TANTOWI, Akhmad, Prof. Keiji Nagai

2009 | Tesis | S2 Magister Ekonomika Pembangunan

The objective of this paper is to identify determinants of tourism demand in Indonesia using econometric analysis. The study applies a dynamic model using a set of panel data of 30 country of origin for Indonesian tourism during period 1980–2007. The Generalized Methods of Moment (GMM) developed by Arellano and Bond (1991) is employed to estimate the tourism demand model. The results show that tourism demand in the previous period had an important effect on the current tourism demand. This finding may be interpreted in terms of high consumer loyalty to the destination and as an important word-of-mouth effect on the consumer’s decision when choosing a destination. Indonesian tourism is not considered to be a luxury for 30 countries of origin. Tourism demand in Indonesia is also not very sensitive to transportation costs. Although international tourist inflows into Indonesia are not affected by the prices, they are highly sensitive to prices of other destinations. Malaysia and Thailand are alternative tourism destinations for Indonesia, while Singapore is a complementary destination. Accommodation capacity and government’s development expenditures in tourism sector significantly influenced tourism demand in Indonesia. The results indicated an empirical justification of the supply induced demand hypothesis. Finally, the study found that the 1997–1998 economic crisis and the terrorist attacks in Bali have negative impacts on tourism demand in Indonesia.

Kata Kunci : Tourism demand,Indonesia