Households’ Net Financial Wealth as a Determinant of Tourism Demand Cycles: Evidence from US Travel to Selected Caribbean Destinations

Abstract

Developments in households’ net financial wealth may be a better determinant of tourism demand flows than income. This study investigates the effect of cycles of US households’ net financial position on US tourism demand flows for three destinations (Aruba, Barbados, and Jamaica). The literature has conventionally considered income as a key driver of tourism demand, despite the imperfections of several applied proxies. However, there could be a disconnect in the relationship between income and tourism demand because of the net financial position of households. The study contributes to the literature by introducing net financial wealth as a determinant of tourism demand, by heterogenizing consumer decisions, and by providing theoretical propositions. The methodology includes data decomposition, unit root testing, and application of logistic regression. The results show that the relationship is household-, cyle-, and country-specific across time and probability dimensions, which could assist policy makers in better managing developments in destinations.