Forecasting tourism demand of Singapore : a loglinear regression model

This paper aims to first, identify the factors that influence the flow of tourists into Singapore and second, to generate forecasts of international tourist arrivals to Singapore for the period 2009 - 2015. The demand from each of the five major origin markets – Indonesia, Australia, China, Japan and Malaysia, was modeled and forecasted separately by estimating the effects of changes in income, relative prices and exchange rates, cost of travel and special events. Empirical results show that income and the exchange rates between the origin and destination countries are the most important factors that influence demand for Singapore tourism. In addition, models with lagged variables consistently perform better than static ones, suggesting the dynamic feature of the tourists’ decision-making process. Forecast results based on the best fit models reveal that arrivals from China will have the highest growth rate and is expected to overtake Indonesia as the largest tourist generating country in 2013. In the most likely forecast scenario, total tourist arrivals will reach 15.4 million. In the optimistic and pessimistic cases, the arrivals are expected to be 16.5 million and 13.4 million respectively. In view of the foregoing scenarios, it is surmised that the 17 million tourist arrival target as set by the Singapore Tourism Board for 2015 is unlikely to be achieved. As such, it is imperative for policymakers and tour operators to re-evaluate their future strategies.BUSINES