As highlighted through a survey of early studies of international tourism by Sinclair (1998), income from tourism contributes significantly to the developing countries, in particular to the SIDS. Yet, few studies have rigorously investigated the factors that influence international tourist flow to the destination countries. As such, this chapter extends the line of the recent tourism literature that frequently employs the single equation model (SiEM) with a focus on country-level factors (Chasapopoulos & Butter, 2014; Culiuc, 2014; Durbarry, 2008; Jensen & Zhang, 2012; Naudé & Saayman, 2005).
Study finds, among other things, that tourist inflow to SIDS, is not very sensitive to price compared with tourist income and security issues. For instance,elasticity on the tourist income remains in the 0.8–0.9 range for the full sample and elasticity increases to 1.7 for SIDS. Result also shows that 1 point increase in instability leads to about 7% decrease in visitors. Culiuc (2014) finds magnitude at 7.9 % using a different indicator for stability. As such, findings from the study appear to support the hypotheses that adverse economic situation in Europe, and deteriorating level of security indicators in the Maldives have contributed to the stagnation of European market.
The study also finds that 70% of total arrivals to the Maldives can be attributed to consumer loyalty and habit persistence in favor of the Maldives. Further, all three proxies used for investment in tourism related infrastructure are statistically significant, and the coefficients suggest that impact is greater for the lower income countries and island economies.
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