Modeling international tourist flows to Indonesia and Malaysia

The major purpose of this study was to examine the primary factors that influence the flow patterns of tourists to Indonesia and Malaysia. The objectives of the study included: (1) estimating the tourism demand models from six important origin countries (Japan, Singapore, Australia, USA, UK, and Germany) to Indonesia and Malaysia using annual time-series data, and (2) estimating the stability of inbound tourism demand models for Indonesia and Malaysia as a function of increasing government intervention in tourism using panel data. The second objective specifically examined the differences in the estimated parameters before and after formation of an important tourism development organization in the respective destination country.;The basic demand model used to accomplish the objectives is based on the classic demand theory of economics. Therefore, the primary factors examined were income, prices of goods and services, and time-trend. Dummy variables also were included in the models to account for a number of special events (for objective one) and country differences (for objective two). The double-log functional form was chosen to test the data. Ordinary Least Square multiple regression technique was used to estimate the demand models, and only secondary data were used for the analysis.;The findings of the study generally affirm that income, prices, and time-trend were important factors determining tourism demand for Indonesia and Malaysia. However, tourists from the same origin country were found to respond to changes in the factors differently, depending upon the destination country in question. The results also support the hypothesis which postulates that the estimated tourism demand elasticities for Indonesia and Malaysia vary as a function of increasing government intervention. This study has identified ways for the Indonesian and Malaysian governments to further exploit their tourism sectors through appropriate adjustment in their tourism policies and marketing efforts.