Analysis of International Tourism Demand for Cambodia’s Tourism

Abstract

To the best of the author’s knowledge this paper fills an epistemological gap as there has never been a research paper published using quantitative analysis for Cambodia’s tourism industry. This paper contains an econometric analysis of international tourism demand for Cambodia’s tourism for two main objectives. Firstly, to understand factors influencing international tourists’ decision-making in coming to Cambodia. Secondly, to forecast short- and long-term international tourist inflows. The 17 year period (1996–2012) is the time frame used to scrutinize the degree to which determinants of economic and non-economic factors influenced international tourist arrivals to Cambodia. Using fixed-effect and random-effect models, six sets of panel data from 26 countries has been analyzed. For the purpose of the study, these countries are grouped geographically into ASEAN, Asia, Oceania, Europe, North America, and a 26-country group (all countries combined). In regards to the first objective of the study, the results reveal the GDP per capita of the tourist countries of origin in the previous year has a significant and positive effect on international tourist arrivals into Cambodia, especially tourist arrivals from ASEAN, Oceania, and North America. Tourists from Oceania are less sensitive to an increasing cost of living in Cambodia. This is opposite to tourist arrivals from Europe wherein price elasticity is positive. It is of interest that tourist groups from Europe and Oceania show sensitivity to price changes in Cambodia in a vice-versa way, i.e., if relative price increases in Cambodia then tourist arrivals from Europe increase slightly while tourist arrivals from Oceania decrease slightly.

Transportation cost has a positive impact on tourist arrivals from Asia, Oceania, and Europe, but has a negative impact on tourist arrivals from North America. The distance between Asia and Cambodia is logically not an obstacle for discouraging tourists from travelling to Cambodia, while tourists from Europe and Oceania might take a trip to Cambodia via neighboring countries where it is convenient and easy to get into Cambodia. The lack of long haul flights direct to Cambodia could be a contributing factor for the case of North American tourists. The global financial crisis in the period of 2008‒2009 (D1) had a negative impact on tourist arrivals to Cambodia from North America. This is likely due to hardship caused by the crisis having a more telling effect on the people in this region which in turn discouraged them from travelling to Cambodia. The financial crisis in Asia in the period of 1998‒1999 (D2) discouraged tourists from travelling to Cambodia from the 26-country group and from North America. Paradoxically, number of tourists from Europe increased during this period. The coefficients from ASEAN and Asia are not significant for this variable, though they are negative, which is in line with expected results that the crisis might had an impact upon some countries of ASEAN and Asia. The September 11 attack in the U.S. during 2001–2002 (D3) had a negative influence on tourist arrivals from North America, but a positive effect on tourists from Oceania and Europe. This result indicates that American sentiment was low right after the September 11 attack which, discouraged Americans from travelling abroad, but the event seems to have no impact on tourist arrivals from Oceania and Europe. In addition, the Thai military coup in 2006 (D4) had no significant effect on tourist arrivals to Cambodia. The Cambodia-Thai border dispute in the period of 2008‒2011 (D5) had a positive effect on international tourist arrivals to Cambodia from Oceania and North America. The result suggests the dispute became an unexpected advertising channel for the Cambodia tourism industry which encouraged tourists to Cambodia. The SARS epidemic in Asia in 2003 (D6) had a positive effect on tourist arrivals from the 26-country group and from every region. This illustrates that Cambodia, which is a relatively safe place from SARS, attracted tourists from other Asian countries with had SARS outbreak.

The political instability and deadlock in Cambodia in 1997–1998 and 2003 (D7) had a negative impact on tourist arrivals from the 26-country group, Oceania, Europe, and North America. The internal conflicts in Cambodia could be harmful to the tourism industry as they discourage tourists, especially those from long-distance countries. The tsunami in Japan and in Southeast Asia (D8 and D9) had a positive effect on international tourist arrivals to Cambodia from every region. Although the events were horrific for the affected countries, they benefited Cambodia’s tourism industry. Tourists may have changed their plans from travelling to the impacted countries and travelled to Cambodia instead. The single visa entry scheme for the five ASEAN countries (Cambodia, Laos, Myanmar, Thailand, and Vietnam) which commenced in 2012 (D10) had a significant and positive effect on tourist arrivals from Oceania. This suggests that international tourists, especially from Oceania, utilize the benefit of a single visa because they can plan to visit several countries in ASEAN using the same visa. The visa exemption among the ASEAN countries in the period of 2006‒2012 (D11) had no significant effect on tourist arrivals to Cambodia. In regards to the second objective of the study, future international tourist arrivals to Cambodia during the period of 2014‒2017 are predicted using scenario analysis. The three main scenario assumptions are the worst-case scenario, normal-case scenario, and the best-case scenario. These scenarios are determined by using three statistically significant independent variables, i.e., Gross Domestic Product Per Capita in the previous year (GDPPCt-1), Relative Price (RP) and Transportation Cost (TC). The worst-case scenario results predict a significant decline in international tourist arrivals to Cambodia from North America of approximately 55 percent, followed by 40 percent of tourists from ASEAN and with tourist arrivals from Oceania showing the lowest negative growth rate of only 0.12 percent. Numbers of tourist arrivals from Asia and Europe are predicted to show a downturn of 27 percent and 28 percent, respectively, in the worst-case scenario. In the normal-case scenario, numbers of tourist arrivals from ASEAN, Europe, Asia, and Oceania are predicted to have a positive growth rate of around 8 percent to 9 percent. The number of tourist arrivals from North America is predicted to have the lowest growth rate of around 5 percent. In the best-case scenario, the number of tourist arrivals from Asia is predicted to have a growth rate of 41 percent (the highest), while that from North America is predicted to be only 6 percent (the lowest). Results from the study could be valuable for Cambodia’s policy makers to investigate the suitability of current tourism policies of Cambodia. In addition, the policy recommendations from the study could provide a guideline for the Cambodian government to formulate new development strategies for Cambodia’s tourism industry for more vigorous and sustainable growth of this industry.