Title: Forecasting and modelling for the inbound tourism demand volatility

Authors: Yuruixian Zhang; Wei Chong Choo; Yuhanis Abdul Aziz; Choy Leong Yee; Jen Sim Ho

Addresses: Department of Management and Marketing, School of Business and Economics, University Putra Malaysia, 43400, UPM Serdang, Malaysia ' Department of Management and Marketing, School of Business and Economics, University Putra Malaysia, 43400, UPM Serdang, Malaysia ' Department of Management and Marketing, School of Business and Economics, University Putra Malaysia, 43400, UPM Serdang, Malaysia ' Department of Management and Marketing, School of Business and Economics, University Putra Malaysia, 43400, UPM Serdang, Malaysia ' Department of Management and Marketing, School of Business and Economics, University Putra Malaysia, 43400, UPM Serdang, Malaysia

Abstract: Many past studies conducted have explored and focused primarily on forecasting and predicting tourism demand. However, this research aims to concentrate on the aspect of how tourism demand volatility can be forecasted and accounted for, rather than solely on how we can forecast and anticipate tourism demand itself. Seven source countries for monthly tourist arrivals in Malaysia will be considered and focused as a case study in this paper. Furthermore, the model theory of generalised autoregressive conditional heteroscedastic (GARCH) family volatility are explored in its relevance and introduced in this study. Additionally, the performance and evaluation of a new adaptive forecasting method, smooth transition exponential smoothing (STES), will be compared to GARCH-type models and several ad hoc methods for Malaysia's tourism demand volatility forecasting and modelling. Notably, our research conducted reported findings that monthly seasonality impacts existed in the mean equation, and the GARCH family models revealed that news shock continuously impact on Malaysia's tourism demand volatility. The EGARCH and GJR models utilised in this study also exhibited the asymmetric and leverage effects. Interestingly, it was also observed that the STES model surpassed GARCH family models and several ad hoc methods in forecasting and modelling.

Keywords: smooth transition exponential smoothing; STES; GARCH family models; ad hoc methods; tourism demand volatility; forecasting; modelling.

DOI: 10.1504/IJSEM.2022.126218

International Journal of Services, Economics and Management, 2022 Vol.13 No.3, pp.282 - 312

Received: 20 Aug 2021
Accepted: 27 Oct 2021
Published online: 17 Oct 2022 *

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