A Model of Tourism Demand for Tunisia: Inclusion of the Tourism Investment Variable

Abstract

This paper examines the determinants of European tourism demand for Tunisia. France, Germany, Italy and the UK are considered as the four major origin countries of Tunisian tourism since they generate more than 70% of the total number of hotel nights. The author applies a cointegration analysis to examine the long-run relationship between the number of nights spent by Europeans in Tunisian hotels and leading macroeconomic variables such as income in the origin countries, relative prices and the volume of tourism investment for the period 1962–2005. Error correction models are also constructed and estimated to study the short-run dynamics of tourism demand for Tunisia. The paper finds that the first determinant of tourism demand is the income of the tourist-generating countries, whereas Tunisian tourism is less sensitive to price variations and tourism investment. The results of the study are consistent with both economic theory and empirical fact.