A Dynamic Panel Data Study of the German Demand for Tourism in South Tyrol

Abstract

Germany is traditionally the most important source of tourism for South Tyrol. The purpose of this study is to investigate the determinants of the German demand for tourism in this Italian region. We introduce a dynamic panel data model for modelling short and long-term responses. We use annual data from 1987 to 2007 of the per capita GDP of Germany (measuring income), the number of German tourists in each of the 116 tourism destinations of South Tyrol (measuring the volume of tourism), the relative prices between Italy and Germany (measuring tourism price) and price of crude oil (as a proxy of travel costs). The main results of this study are: (1) the demand for tourism in the previous period has a positive and relevant effect on actual demand, reflecting loyalty of the German tourists; (2) the cost of travel and the relative prices have a negative and significant impact on tourism demand.