Tourism Demand for Mexico and Uruguay
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Tourism demand for Mexico and Uruguay Gabriela Mordecki Ana Leiva Nathalie Desplas INSTITUTO DE ECONOMÍA Diciembre, 2016 Serie Documentos de Trabajo STITUTO DE DT 09/2016 ECONOMÍA ISSN: 1510-9305 (en papel) ISSN: 1688-5090 (en línea) . Forma de citación sugerida para este documento: Mordecki, G., Leiva, A. & Desplas, N. (2016). “Tourism demand for Mexico and Uruguay”. Serie Documentos de Trabajo, DT 09/2016. Instituto de Economía, Facultad de Ciencias Económicas y Administración, Universidad de la República, Uruguay. Tourism demand for Mexico and Uruguay 3 Tourism demand for Mexico and Uruguay Gabriela Mordecki Ana Leiva Nathalie Desplas Abstract Tourism is frequently viewed as an important engine for the economic growth and country’s development. In Mexico, the domestic trips have become a notable feature but the main tourism exports are from internationals travelers. In 2014 Mexico was the 10th most attractive country for travelers and 58.3% came from the United States.For Uruguay, total yearly tourists represent about 90% of its population, and Argentinean tourists represent nearly 60% of this total and historically they have been themain visitors. Tourist activities have a great impact on both economies, and in this paper, we try to measure tourism demand comparing Mexico and Uruguay, two very different countries, but for both tourism is an important industry, generating employment and income. Therefore, it is central to analyze the determinants behind tourism demand. We study the relationship between the number of US tourists for Mexico and Argentinean tourists for Uruguay, analyzing the relationship with the income and the real exchange rate (RER) of each country. We studied long-run cointegration vectors between variables, following Johansen methodology. We found one cointegration relationship for each country, through Vector error correction models (VECM). We found an income-elasticity greater than 2 for American tourists in Mexico, and near 3 for Argentinean tourists in Uruguay. Bilateral RER also were significant in both models. Keywords: tourism demand, cointegration, real exchange rate. JEL Classification: C32, F14, F41. Gabriela Mordecki, Ana Leiva, Nathalie Desplas 4 Instituto de Economía-FCEyA Demanda turística de México y Uruguay Gabriela Mordecki* Ana Leiva** Nathalie Desplas*** Resumen El turismo es frecuentemente visto como un importante motor para el crecimiento y el desarrollo económico de los países. En México, el turismo interno es muy importante, pero los principales ingresos provienen del turismo internacional. En 2014 México fue el 10º país más atractivo para los viajeros y el 58,3% entre los de Estados Unidos. Para Uruguay, los turistas anuales totales representan alrededor del 90% de su población, y los turistas argentinos representan casi el 60% del total, los que históricamente han sido los principales visitantes. Las actividades turísticas tienen un gran impacto en ambas economías, y en este artículo se intenta de medir la demanda turística para México y Uruguay, dos países muy diferentes, pero en ambos el turismo es una importante industria, generadora de empleo y de ingresos. Por lo tanto, es muy importante analizar los determinantes detrás de la demanda turística. Aquí se analiza la relación entre el número de turistas de Estados Unidos que visitaron México y los turistas argentinos que visitaron Uruguay, para ambos países en función del ingreso del país emisor y del tipo de cambio real bilateral (TCR) entre ambos países. Para ello se intenta encontrar vectores de cointegración de largo plazo entre las variables, siguiendo la metodología de Johansen. Se encontró una relación de cointegración para cada país, a través de modelos de corrección de error (VECM). La elasticidad-ingreso encontrada es superior a 2 para los turistas estadounidenses en México, y cerca de 3 para los turistas argentinos en Uruguay. El TCR bilateral también resultó significativo en ambos modelos. Palabras clave: demanda de turismo, cointegración, tipo de cambio real Código JEL: C32, F14, F41 Gabriela Mordecki y Ana Leiva son docentes e investigadoras del Instituto de Economía, Facultad de Ciencias Económicas y de Administración, Universidad de la República y Nathalie Desplas es docente e investigadora del Tecnológico de Monterrey Campus Chihuahua, México. *Gabriela Mordecki: [email protected] **Ana Leiva: [email protected] ***Nathalie Desplas: [email protected] Gabriela Mordecki, Ana Leiva, Nathalie Desplas Tourism demand for Mexico and Uruguay 5 1. Introduction Tourism is frequently viewed as an important engine for the economic growth and country’s development (Brida&Risso, 2009; Tang & Tan, 2013; Schubert, Brida, &Risso, 2011; WTTC1, 2011; Desplas, 2010). Tourism mobility is increasing over time and space, allowing increasing destination income, employment, foreign currencies earnings, and balanced balances of payments. Experts argue that the tourism industry continues to be one of the world's largest sectors with a crucial impact in the economic welfare of local populations, the entrepreneurship activity, the direct and indirect tourists’ spending due to the multiplier effect. In addition, recently, the tourism-growth literature explains that tourism is perceived in many regions as a crucial source of their own expansion and development. For example, in developing countries (Ghimire, 2013); Malaysia (Tang & Tan, 2013); Pakistan (Adnan & Ali, 2013); Cyprus, Latvia and Slovakia, (Chou, 2013); Singapore (Timothy, 2014); Hong Kong (HK Tourism Board, 2014); China (Chon, Pine, Lam, & Zhang, 2013). In other places like the Mediterranean countries (Tugcu, 2014); the Latin-American countries (Peterson, Cardenas, &Harrill, 2014); Mexico (UNTWO2, 2014b); the USA (White House, 2014); and the European Countries in general (Costa, Panyik, &Buhalis, 2014) among others. Tourism is also more critical in a resource-poor environment, such as in small islands destinations like Aruba (Ridderstaat, Croes& Nijkamp, 2014). Over the last decades and despite economic, security or health crisis, tourism experienced continued growth, innovation and diversification, becoming “one of the largest and fastest- growing economic sectors in the world from 25 million in 1950, to 278 million in 1980, 528 million in 1995, 1,035 million in 2012, and 1,087 million in 2013” (UNWTO, 2014b). According to UNWTO (2014a and 2014b), despite crisis and health situations international tourism expansion continued to be substantial in 2013 and has generated growth all over the world, assessing again the contribution tourism makes to social and economic development. This strong key driver of socio-economic and commercial development creates export revenues, infrastructure investments, jobs’ creation and small businesses’ generation. The current tourism’s situation remains as follows for the entire 2013 representing: 9% of total GDP including the direct, indirect and induced impact in the economy, 1 in 11 jobs at an international level, US$ 1.4 trillion in exports and 6% of the world exports, 1,087 million in 2013 (+52 million), 5 to 6 billion domestic tourists, Increase of investment in infrastructure, New destinations and flights. For the coming years (towards 2030), UNWTO (2011) displays the existence of a solid potential for more expansion highlighting that: 1 World Travel and Tourism Council. 2United Nations World Tourism Organization. Gabriela Mordecki, Ana Leiva, Nathalie Desplas 6 Instituto de Economía-FCEyA Global growth in international tourists’ arrivals will go on at a weaker rate, from 4.2% per year (1980–2020) to 3.3% (2010–2030), international tourist arrivals worldwide reaching 1.8 billion by 2030, Towards 2030, arrivals in emerging countries (+4.4% a year) are expected to rise twice the rate of advanced destinations’ ones (+2.2% a year). The market share of emerging economies increased from 30% in 1980 to 47% in 2012, and it is expected to reach 57% by 2030, equivalent to over one billion international tourist arrivals. Sánchez, Pulido & Cárdenas (2013) assess that tourism is expected to generate over a horizon of ten years, 11.3 % of the world GDP and 8.3% of the employment. The expected expansion of the tourism sector towards 2030 is a result of four factors regarding UNWTO (2011): The increase (even marginal) of travelers is represented by a substantial amount of tourists because the calculation volume base is higher. The GDP growth will be strong but lower especially in international arrivals. It is expected to be also more sustainable and inclusive to local population. The elasticity of travels to GDP will decrease because trips are not considered anymore as a luxury service but a superior service, part of the new consumer purchase’s behavior. Despite that the transportation costs are rising again after some decades falling down, they still will represent a growth in arrivals number. In the USA, many more American consumers from middle class traveled inside the region (Ghimire, 2013), particularly in Mexico. With 120 million inhabitants, 12,000 km of coastline (along the Pacific and Atlantic oceans) and a strong diversity of climates, domestic trips in Mexico have become a notable feature. Nevertheless, the main tourism exports are from internationals travelers for who Mexico was the 10th country more attractive in 2014 and the 9th in 2015. In descending order, the international arrivals (by plane) in Mexico in the first 8 months of 2014, correspond to the following nationalities and market share: USA