Cross Country Relations in European Tourist Arrivals

Highlights

• We introduce a new approach to find leading indicators in the tourism industry.
• Multivariate Singular Spectrum Analysis is introduced for tourism forecasting.
• We find the existence of cross country relations in European tourist arrivals.
• The MSSA algorithm outperforms SSA, ARIMA and ETS techniques.

Abstract

This paper introduces an optimized Multivariate Singular Spectrum Analysis (MSS) algorithm for identifying leading indicators. Exploiting European tourist arrivals data, we analyse cross country relations for European tourism demand. Cross country relations have the potential to aid in planning and resource allocations for future tourism demand by taking into consideration the variation in tourist arrivals across other countries in Europe. Our findings indicate with statistically significant evidence that there exists cross country relations between European tourist arrivals which can help in improving the predictive accuracy of tourism demand. We also find that MSSA has the capability of not only identifying leading indicators, but also forecasting tourism demand with far better accuracy in comparison to its univariate counterpart, Singular Spectrum Analysis.