Economic analysis of tourism consumption dynamics: A Time-varying Parameter Demand System Approach

This study considers the dynamics of the consumption behaviour of tourists from an economic perspective. The evolution of various demand elasticities is explored using a time-varying parameter almost ideal demand system model. The top four source markets for tourism in Hong Kong are examined, and three major tourist expenditure categories, including shopping, hotel accommodation and meals outside hotels, are investigated for each market. Elasticity analysis reveals different consumption trends and patterns across the source markets. The findings will serve as a useful reference for Hong Kong tourism-related industries and the government in their efforts to enhance the competitiveness of Hong Kong as an international tourism destination.

► This study examines the dynamics of tourists’ consumption behaviour in Hong Kong from an economic perspective. ► Evolution of demand elasticities is studied based on the time-varying parameter and an almost ideal demand system. ► Elasticity analysis reveals different consumption trends and patterns across the source markets. ► The findings provide a useful reference for Hong Kong tourism industries to enhance their competitiveness.