Small Grant Research Papers

Modelling Tourism Demand for South Africa using a system of equations approach: The Almost Ideal Demand System

  • Year: 2012
  • Organisation: TIPS
  • Publication Author(s): Andre Botha
  • Countries and Regions: European Union (EU), South Africa

This research aims to model tourism demand for South Africa from the UK and the USA by using an almost ideal demand system. An error correction almost ideal demand system (EC-AIDS) is used to quantify the responsiveness of UK and USA tourism demand to South Africa relative to changes in tourism prices and expenditure or income. Short-term own-price, cross-price and expenditure elasticities are derived from the EC-AIDS models. One of the key findings of the paper is that tourism from the UK and USA is not sensitive to price changes in South Africa in the short-term. Tourism to South Africa is found to be more income elastic than price elastic, indicating that the country is vulnerable to changing world economic conditions. Even though price competitiveness does not seem to be a key concern yet, significant substitution effects are present, with especially Spain and Malaysia benefitting from a decline in South Africa's price competitiveness