SPECIALIZATION, DIVERSIFICATION AND SEGMENTATION OF BRITISH AND GERMAN TOURISTS TO THE BALEARIC ISLANDS

Abstract

International tourism is an important source of service exports to Spain and its regions, particularly the Balearic Islands. Tourism is the major industry in the Balearic Islands, accounting for about 85% of GDP. This paper examines the time series properties of international tourism demand to the Balearic Islands. The data set comprises monthly figures from 2 leading tourist source countries, namely UK and Germany for the period January 1987 to October 2003. Tourist arrivals and the associated volatility (or uncertainty) of monthly tourist arrivals are estimated for the 2 data series. The univariate models estimates suggest that conditional volatility models provide an accurate measure of uncertainty in monthly tourist arrivals from the UK and Germany. The estimated conditional correlations indicate whether there is specialization, diversification or independence in the British and German tourism demand shocks to the Balearic Islands.