Investigating other leading indicators influencing Australian domestic tourism demand

In the tourism demand literature, much of the research focuses on income and price variables as demand determinants for travel. Nevertheless, the literature has neglected other possible indicators such as consumers’ perceptions of the future course of the economy, household debt and the number of hours worked in paid jobs. In fact, several studies found that these indicators could influence consumers in making decisions to travel. In this paper, we intend to examine whether there are other indicators that can influence future Australian domestic tourism demand. The research employs panel data with a total of 252 observations. For the dependent variables, the disaggregated data for domestic visitor nights will be used, namely the visitor nights by holiday-makers (HOL), business travellers (BUS) and visitors who visited friends and relatives (VFR). In terms of the independent variables, we employ the following proxy variables for this research: (1) the consumer sentiment index; (2) business confidence index; (3) interest repayments for household debt; and (4) average actual worked hours in paid jobs. The econometric model used in this study is a panel three-stage least square (3SLS) model. The empirical results reveal several points. First, it is found that the consumer sentiment index has significant impacts on VFR but not on holiday tourism. Furthermore, the business confidence index has no influence on business tourism demand. The study also finds that an increase in household debt could encourage more Australians to travel domestically, indicating that Australians may consider increasing debt as their confidence to spend increases. Lastly, working hours have a statistically significant effect in the case of holiday tourism data.