Literature Review
The identification, analysis, and measurement of the impacts of the determinants of tourism demand are central to any effort to understand and explain changes in demand in the past and to anticipate the possible pathways of future tourism
demand development. A number of variables have generally been examined and accepted in previous research as the main determinants of international tourism demand. However, significant distinctions can be drawn between the influences of
different determinants for different visit purposes. For example, Turner and Witt show that the volume of international trade is closely associated with business tourism
demand, but that the volume of retail sales is more closely associated with the demand for holiday tourism, and the demand for visits to friends and relatives (VFR) is linked
more to overall gross domestic product (GDP). Income in source markets has been demonstrated in past research to be a dominant explanatory variable and is the
most widely discussed determinant of international tourism demand. Most researchers employ either nominal or real GDP or gross national product (GNP), or their per capita
forms, as a suitable measure of tourists’ income Turner and Witt 2001). Other less commonly used measures of income include real consumption
per capita (Dritsakis 2004); superfluous income that is defined as real disposable income less expenditure on food, housing, fuel, and power (Edwards 1979); foreign travel budgets (Smeral and Witt 1996); industrial production indices and real household disposableincome (Lim 1997). Most of the empirical studies demonstrate that in accordance with economic theory, income has a positive effect on tourism demand. They also conclude that international tourism is a luxury product as indicated by the fact that most studies have estimated an income elasticity of demand exceeding the value of 1.0, which shows that, as income rises, tourism consumers spend an increasing proportion of their income on international travel. According to a metaanalysis
of 1,501 estimates by Crouch (1996), the mean income elasticity was found to be 1.86, with a standard deviation of 1.78. Crouch (1992) also suggested that different
estimates arise depending on the different income measures employed (e.g., total income vs. per capita income). When holiday visits or VFR travel are under consideration, the more appropriate form of the income variable is private consumption
or personal disposable income, while a general income measure is more appropriate for business visits. Moreover, income elasticity may differ considerably across
different origin–destination pairs. For example, the estimated income elasticity of the demand for Aruba tourism varies from 1.43 for U.S. tourists to 2.52 for Dutch visitors . By contrast, Naude and Saayman show that the level of income in origin countries has little effect on the demand for tourism in Africa.