Fifth International Conference on Tourism & Leisure Studies

Abstract

This paper empirically tests the determinants of Philippine international inbound tourism flows from twenty-three of the top twenty-five foreign markets of the country destination using Poisson Pseudo-Maximum Likelihood (PPML) estimation with country-pair and time-varying fixed effects, a process more appropriate than Ordinary Least Squares (OLS) estimation for logarithmically transformed bilateral economic datasets with potential data issues such as heteroskedasticity and multilateral resistance, among others. So far, this is the only paper that employs PPML estimation to model Philippine tourism flows. The results are consistent with the existing literature on the expected signs of the coefficients of the determinants of tourism flows–income-related variables having positive effect (which imply that Philippines as a destination is a “normal” rather than an “inferior good”), price and cost-related variables with negative effect, and the other gravity variables consistent with expectations. Except for the relative price of Malaysia as an alternative destination, all the other determinants have inelastic effect on the Philippine international inbound tourism demand. Looking further into the cross-price elasticity of demand in relation to the alternative destinations, the results suggest that Malaysia and Thailand are complementary destinations of the Philippines, while Indonesia and Vietnam are substitute destinations of the country.