SUBSTITUTES OR COMPLEMENTS? EVIDENCE OF THE RELATIONSHIP BETWEEN AIR AND CRUISE TOURISM

Abstract

This paper estimates the relationship between cruise and air tourism and their impact on economic growth in the Caribbean. To this end, we assemble a monthly data set of cruise and air tourist arrivals and a satellite-derived economic wealth proxy for 21 Caribbean islands over the period 2000 to 2013. The estimates from a panel vector autoregression model not only demonstrate that cruise and air tourism are substitutes but it is the former for which this effect appears to be more permanent.Further, our analysis shows that while air tourism has a more immediate economic impact, cruise tourism has more long-term economic benefits. Our findings highlight the need for implementing policies to increase the value of cruise tourism to local economies as well as the effective management of revenue generation.