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Determinants of International Tourism Demand for the Philippines: An Augmented Gravity Model Approach

Deluna, Roperto Jr and Jeon, Narae (2014): Determinants of International Tourism Demand for the Philippines: An Augmented Gravity Model Approach.

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This study was conducted to investigate the determinants of international tourism demand for the Philippines.This study employed a double-log augmented form of gravity model estimated using the robust random effects model.Results revealed that tourist arrival in the Philippines are generally increasing from 2001 to 2012. Empirical estimation was conducted to determine factors affecting Philippine tourism demand. These factors include income, market size, and distance. Relative prices was also identified which includes cost of living and price of goods and services in the Philippines and other related tourism destination like Malaysia, Indonesia and Thailand. Supporting variables like direct flights, conflict, commonality in language and common colonizer between the Philippines and source of origin of the tourist was also examined. Furthermore, it also includes impact of calamity in the tourist home country and common membership to ASEAN.

Empirical results show that tourist inflow is positively and significantly affected by income of the origin country and is reduced by population and distance. Relative low prices of tourism in term of cost of living and prices of goods and services in the Philippines have no effect in attracting inbound tourist. Furthermore, international demand for Philippine tourism is not affected by relative prices of tourism in Malaysia, Indonesia and Thailand as the competing tourist destinations. Conflict and common colonizer between Philippines and country of origin are not significant determinants of international tourism demand. Among the variables, direct flights turned out to be the most significant factor that can contribute to the increase in tourism demand of the Philippines.

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