Anatomy of Demand in International Tourism: The case of Aruba

This is a study pertaining to the determinants of demand for small island destinations that attract international tourism. The study specifies a dynamic econometric model that reflects causal links between variables that activate short and long-term responses. The study developed a set of linear and double-log linear econometric models to identify and to quantify Aruba?s international tourism demand from the United States, the Netherlands, and Venezuela. The inclusion of Venezuela as a developing country permitted the comparison between the behavior of tourism demand in relatively rich and poor countries. Understanding the demand dynamics of tourism can be an extremely valuable policymaking tool in countries with limited resources. The results of the study indicate the extent to which cross country behavior for tourism demand differs with respect to changes in effective prices and exchange rates. Such an enhanced understanding of the dynamics of demand should aid both policymakers and private sector managers in making more effective decisions regarding the supply and consumption of tourism services in small island destinations.