An ARDL bounds test approach to modelling tourist expenditure in South Africa

Abstract

This research follows micro-economic theory, according to which demand for a product is influenced by price, substitute prices and income, to determine the sensitivity of inbound tourist expenditure in South Africa to changes in these variables. Tourist expenditure per person per day from different origins forms the dependent variable. Using quarterly time-series data from 2003 to 2010, this article models inbound tourist expenditure from key source markets for the country. Previous research based on arrivals finds that South Africa is a relatively price-insensitive destination. However, this research shows that this is not the case for all markets. It mostly confirms the income elasticity of South Africa as a destination.