Temporal evolution of tourists arrivals in Spain

This paper studies the evolution of the external demand for spanish tourist services. The analysis is carried out within the framework of Structural Time Series Models that are formulated in terms of unobserved components stochastically specified. The first aim of this work is to analyse tourism trends. A measure of the underlying rate of growth of the international demand is derived in order to evaluate whether the sector is in a period of expansion or recession. The empirical results show that the worst period of the crisis suffered at the end of the eighties by the tourist industry is over now and the future prospects are quite optimistic in the short run. The second aim of this paper is to perform an econometric analysis of the tourism demand in Spain in order to understand the major facts which influence visitation levels. The estimated structural model includes as explanatory variables an income index, two price indexes (one with respect to client countries and another with respect to competitor countries), a stochastic trend, representing the changes in tourist tastes, and a stochastic seasonal component. The forecasting performance of the estimated structural model compares well with the forecasting performance of two alternative dynamic models, the transfer function and error correction models