Basic Statistical Methods and Applications, Spring 2023

How do Factors of Tourism Industry Development Impact Tourism Income?

SolBridge International School of Business
Basic Statistical Methods and Applications
June 10，2023
Wu Huilin 202101113
Bai Rruibing 202102008
Lin Shu 202101138
Kay Zin Zoe 202201095

Number of words: 2004

Program used: Excel

1.Abstract
This study examines the impact of factors related to tourism industry development on
tourism income. Using the panel data of 50 countries from 2016 to 2020, the impact of tourism
industry influences on tourism income was further studied and analyzed through a fixed effects
attribution model (FEM). The results found that Expenditures for passenger transposition, GDP
per capita and Number of inbound tourists have a positive impact on tourism income.
Suggestions are given to maximize tourism income through optimizing visitor numbers and
managing operational outputs. This provides valuable insights for policymakers and industry
stakeholders, supporting sustainable tourism growth.

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2. Introduction

Tourism plays an important role in the economic development of countries and regions

around the world. As globalization continues to facilitate travel and strengthen international

exchanges, understanding the factors that affect tourism receipts is becoming increasingly

important for policy makers and industry stakeholders. This study aims to investigate the

impact of factors related to tourism industry development on tourism income.

The tourism industry has experienced significant growth between 2016 and 2019,

driven by factors such as increasing tourist arrivals and improvements in transport

infrastructure. However, the relationship between these factors and tourism income is complex

and multifaceted. Exploring this relationship can provide valuable insights for optimizing

tourism income and promoting the sustainable development of tourism.

The results of this study will provide insight into the factors that affect tourism income

and provide a reference for strategies to promote the development of the tourism industry. By

identifying the key drivers of tourism receipts, policymakers can develop targeted policies and

interventions to maximize the economic benefits of the tourism sector.

The remainder of this paper provides a comprehensive analysis of the collected data,

discusses the research methodology and analytical methods, and concludes with insights and

recommendations to enhance the contribution of tourism to economic growth and prosperity.

3. Background

3.1 Tourist Expenditure

According to Wang and Davidson (2010), researchers have identified three types of

variables that can be used to measure total expenditure in tourism studies. These variables

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include the total amount spent on the trip, the total amount spent per day, and the amount spent

per day per person.

The field of tourism demand modeling and estimating tourism elasticities has been

extensively explored in the literature, and several comprehensive reviews have summarized the

findings. Lim (1997), Lim (1999), Crouch (1994), and Song and Li (2008) have provided

thorough overviews, synthesizing research spanning almost four decades. These reviews

primarily focus on demand elasticities, which are estimated using macroeconomic variables as

proxies for demand determinants. For instance, GDP per capita and real exchange rate are

commonly employed to estimate income and price elasticities of demand, respectively, in

demand models utilizing macroeconomic data.

3.2 GDP Per Capita

Per capita GDP reflects the economic development level of a country or region and the

purchasing power of its residents. Per capita GDP has a positive correlation with tourism

income. As per capita GDP increases, the income level of residents rises, enabling them to have

more spending power for tourism consumption, thereby increasing the income of the tourism

industry.

For example, in a study by Wu Changliang (2011) on the relationship between per

capita GDP and the tourism market in China, a significant positive correlation was found

between the growth of per capita GDP and tourism income. Similarly, research on tourism

industry data in China in 2010 indicated that when per capita GDP reaches $2,000, the tourism

industry experiences rapid development. When it reaches $3,000, explosive demand emerges,

and at $5,000, it enters a mature vacation tourism economy.

3.3 Number of Inbound Tourists

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 In the realm of a country's tourism industry, inbound tourism holds significant

importance and is frequently linked to various economic advantages such as the influx of

foreign currency, the generation of employment opportunities, and the facilitation of cultural

exchange.

Recent statistics indicate that ASEAN countries have been experiencing a substantial

influx of inbound tourists. Research conducted by Lin and Mao (2015) reveals a consistent

growth in the number of inbound tourists monthly, coinciding with an increase in income and

subsequent rise in tourist expenditures. These trends have had evident economic impacts, as

residents in ASEAN countries now possess higher disposable incomes, leading to a surge in

paid holidays. Additionally, from a social perspective, travel has become more affordable and

accessible compared to previous times, as highlighted by Anser et al. (2020).

4. DATA

4.1 Variables and Measures:

The data used in this study cover variables such as Tourism income, Expenditures for

passenger transportation, GDP per capita, Number of inbound tourists, National territorial area

for 50 countries. These data sources include WorldBank, Wikipedia and related research

reports.

This study focuses on five key variables: Tourism income, Expenditures for passenger

transportation, GDP per capita, Number of inbound tourists, National territorial area, and their

interactions in determining tourism income. By analyzing panel data for a sample of countries

over a specific period of time, we aim to reveal the underlying dynamics and impact of these

variables on tourism receipts.

Explanatory variables: (1) Income for Tourism (I). I is the income generated from

tourism activities in a specific area. It is typically measured in monetary units, such as the local
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currency, and reflects the total earnings attributed to tourism-related businesses and services.

(2) Expenditures for passenger transportation (E) represents the total amount of money spent

on passenger transportation within the area under study. This variable captures the level of

investment in transportation infrastructure, including air, rail, road, and water transportation.

(3) GDP per capita (G) reflects the overall economic development and prosperity of the area

and serves as an indicator of the potential demand for tourism-related activities and services.

(4) Number of inbound tourists (N) represents the total count of tourists visiting the area from

other regions or countries. This variable captures the level of tourism demand and reflects the

attractiveness and popularity of the destination. (5) National territorial area (A) represents the

total national territorial area of the study region. It provides information about the size and

geographic scope of the area, which can have implications for tourism development and

capacity.

4.2 Additional Explanation:

Regarding data definitions and measurements, we followed the instructions and

definitions provided by the individual data sources. For each variable, we performed necessary

data cleaning and processing to ensure data accuracy and comparability. In order to verify the

accuracy of the data, we carried out several checks. We checked the units of the data. By

calculating minimum, maximum and average values, we were able to detect and correct some

potential errors.

All the data processing and analysis work was performed Excel. We list the detailed

data processing methods and calculation steps in the appendix so that readers can reproduce

the research results and carry out Further verification.

Through the above description, we provide the necessary information about data

definition, source, processing and verification to ensure readers can understand the reliability

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of the data and the credibility of the research. At the same time, we also provide the detailed

data processing steps in the appendix, so that readers can further understand the data processing

process.

5. Analysis

5.1 Statistical Characteristics of Main Variables

Statistical Characteristics of Main Variables

Variable Observations Mean Standard deviation Minimum Maximum

Income for
250 17949621598 27395852247 61959600000 38764600000
Tourism (I)

Expenditures
for passenger
250 2333990728 5718498163 82000.00116 10026000000
transportatio
n (E)

GDP per
250 28780.44087 23922.83159 3829.442822 14195.67882
capita(G)

Number of
inbound 250 27349577.95 41110781.83 290200 113949250
tourists(N)

National
territorial 250 1051582.94 2393940.98 264 9834000
area(A)

Table5-1-1

5.2 Time Series Graphs of Variables

The article will continue analyzing on the time-series trend for each of the variable

separately which comes together with its coefficient of variation.

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Graph 5-2-1 Graph 5-2-2

Graph 5-2-3 Graph 5-2-4

Graph 5-2-5 Graph 5-2-6

Graph 5-2-7 Graph 5-2-8

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 By looking at the trend of the graphs, it could be seen that the number for all variables has

a slight increase towards the year 2019. However, because of the COVID-19 pandemic, there

is a drastic decrease in 2020. Variation for income and expenditure decrease in 2020 despite of

the increasing trend in GDP per capita and number of inbound tourists.

5.3 Cross-Section Graphs of Variables

Graph 5-3-1 Graph 5-3-2

Graph 5-3-3 Graph 5-3-4

The frequency distribution of income has been right skewed over the years. It seems like

there is little or no change in general, however, by looking at the box plot, it could be seen that

the income has decreased in 2018 and 2020.

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 Graph 5-3-5 Graph 5-3-6

Graph 5-3-7 Graph 5-3-8

The distribution for expenditures has been right skewed as well. The expenditures for the

3 years seem to follow a similar pattern. The highest is seen in the year 2018 slightly decreasing

in 2020.

Graph 5-3-9 Graph 5-3-10

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 Graph 5-3-11 Graph 5-3-12

The distribution for GDP per capita also follows a similar pattern. The distribution is also

right-skewed but it is not as extreme as the trend in income and expenditure. The general level

of GDP per capita increased doubled in 2018 but it remained in the same level with a slight

decrease in 2020.

Graph 5-3-13 Graph 5-3-14

Graph 5-3-15 Graph 5-3-16

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 The distribution for inbound tourists has been right skewed with the same number of

countries in 2016. The general number of inbound tourists decreased in a large number in the

year 2020.

5.4 Correlation Between Variables

Graph 5-4-1 Graph 5-4-2

Graph 5-4-3 Graph 5-4-4

It is shown in the scatter plot that expenditures, number of inbound tourists and national

territorial area have similar correlation with income. Most of the country are concentrated on

the left, only a few countries showing a distinct correlation. Except for the correlation of

income where differences could be seen on the left.

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6.SUMMARY AND CONCLUSIONS

6.1 Major Findings and Implications

In summary, the variables of expenditures, GDP per capita, number of inbound tourists,

and national territorial area have exhibited developmental trends over the years, albeit

experiencing a slight decline in 2020 due to the impact of the COVID-19 pandemic. The

relationship between these variables and income indicates that most countries have a low ratio,

although some countries demonstrate extreme cases. Notwithstanding the pandemic, it is

evident that substantial disparities exist between developing and developed countries.

Following the pandemic, tourism has been gradually recovering its momentum. To

further facilitate the recovery and growth of tourism, governments can consider providing tax

incentives, low-interest loans, and financial assistance to stakeholders operating within the

industry. These initiatives would aid in improving the offerings and services provided to

tourists. By attracting a greater number of tourists, countries can anticipate an increase in

inbound tourist arrivals, as well as higher income and profits derived from tourist expenditures.

6.2 Limitations and expectations

This study on the impact of tourism industry development on tourism ratings has some

limitations. First, the analysis may not include all relevant variables, such as government

policies and infrastructure developments, which may also affect tourism receipts. Second, the

availability and quality of data, as well as the chosen time frame and land cover coverage, may

affect the reliability and generalizability of the findings. Also, while studies should establish

associations between variables, causality cannot be established. Therefore, future studies can

explore more variations, present higher data quality, consider causality, and conduct

comparative analyzes to gain a more comprehensive understanding of the topic.

BIBLIOGRAPHY

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 1. 人均GDP和旅游消费关系. 人均GDP和旅游消费关系 - 百度文库. (n.d.). (The

relationship between GDP per capita and tourism consumption)

https://wenku.baidu.com/view/1399424f24284b73f242336c1eb91a37f11132b3.html?_wkts_

=1685854039233&bdQuery=

2. Romano Piras. (n.d.). Analyzing the drivers of itemized tourism expenditure from the

UK using survey data.

https://www.sciencedirect.com/science/article/pii/S2666957922000052

3. YU Tong. (n.d.). Analysis on the Inbound Tourist Source Market in Fujian Province.

https://iopscience.iop.org/article/10.1088/1755-1315/69/1/012012/pdf

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