A TIME SERIES ANALYSIS OF THE UNCERTAINTY IN INTERNATIONAL TOURIST ARRIVALS TO THE CANARY ISLANDS

International tourism is an important source of service exports to Spain and its regions, particularly the Canary Islands. Tourism is the major industry in the Canary Islands, accounting for about 22 % of GDP. This paper examines the time series properties of international tourism demand to the Canary Islands collected by the National Airport Administration (AENA) at airports from information regarding the number of tourist arrivals from abroad. The data set comprises monthly figures for the Canary Islands from 14 leading tourist source countries, as well as total tourist arrivals, from 1990(1)-2003(12). Tourist arrivals and the associated uncertainty of monthly tourist arrivals are estimated for the 15 data series. The univariate estimates suggest that conditional volatility (or uncertainty) models provide an accurate measure of uncertainty in monthly international tourist arrivals from the 14 leading source countries, and total monthly tourist arrivals. The estimated conditional correlations indicate whether there is specialization, diversification or independence in the international tourism demand shocks to the Canary Islands. At the multivariate level, the conditional correlations in the monthly tourist arrivals shocks are generally positive, varying from small negative to large positive correlations. These estimates suggest that the shocks from alternative tourist sources are independent or specialized rather than diversified. Therefore, the Canary Islands should specialize on tourist sources that provide the largest numbers and growth in tourist arrivals rather than diversify the tourism base