Impact of unexpected events on inbound tourism demand modeling: evidence of Middle East Respiratory Syndrome outbreak in South Korea

ABSTRACT

This paper attempts to evaluate how South Korea’s inbound tourist arrivals from China have been affected by the Middle East Respiratory Syndrome (MERS) outbreak. Using quarterly data, the autoregressive distributed lag model (ADLM) is performed to capture the influence of the MERS outbreak. Estimation results of the general ADLM reveal that the MERS outbreak has a significant adverse impact on the total inbound tourist arrivals from China, as well as on tour arrivals; however, for business, official, and other types of tourist arrivals, its influence is insignificant. Furthermore, the error correction model is estimated to demonstrate the long-run equilibrium and short-run dynamics among the underlying variables. Our analysis not only provides empirical evidence on evaluating the impact of the MERS outbreak on different types of tourism demand, but also identifies main determinants and suggests appropriate model specifications for each type of tourist arrivals.

KEYWORDS:

• MERS outbreak
• inbound tourism demand
• financial crisis
• H1N1 Flu
• ADLM

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Wind Information Co., Ltd. (http://www.wind.com.cn/en/), headquartered in the Lujiazui Financial Center in Shanghai, is a leading integrated service provider of financial data, information, and software. It has built up a substantial, highly accurate, first-class financial database, which includes stocks, funds, bonds, FX, insurance, futures, derivatives, commodities, and macroeconomic and financial news. It serves more than 90% of the financial enterprises in the Chinese market. Overseas, it serves 75% of the Qualified Foreign Institutional Investors (QFII). Its data are frequently quoted by media, in research reports, and in academic theses.

2. D08_crisis: The early phase is 2007:Q3-2008:Q3 and the later phase is 2008:Q4-2009:Q1(Kuppuswamy & Villalonga, 2016). Thus, it takes on the value of 1 over the period 2007:Q3-2009:Q1 and 0 otherwise.

3. D09_H1N1: In April this year, a new influenza virus of swine origin emerged in Mexico and spread rapidly around the world (Vargas-Parada, 2009). On August 10, 2010, the World Health Organization declared the H1N1 influenza pandemic over. Thus, it takes on the value of 1 over the period 2009:Q2-2010:Q3 and 0 otherwise.

4. D15_MERS: The Korean government reported its first MERS case in May 2015 and declared its outbreak was over in December 2015. Thus, it takes on the value of 1 over the period 2015:Q2-2015:Q4 and 0 otherwise.

Additional information

Funding

This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government (MEST) [NRF-2014S1A2A2027957].