TOURISM DEMAND FORECASTING IN CYPRUS: EVIDENCE FROM BOTH DIVIDED REGIONS

Abstract

This study forecasts tourism demand in the divided Cyprus using the latest econometric techniques. Results reveal that mainland of both sides (Turkey and Greece) in Cyprus are the major determinants of tourist arrivals to the island. Germany is also an important tourist destination for the South Cyprus as investigated by the bounds test to cointegration and error correction models. Tourism demand forecasting using tourist arrivals from the UK to the whole Cyprus did not provide significant results. Short-term estimations from error correction models have proved that real income and relative prices are significant determinants of tourist arrivals to the both parts of Cyprus except the case of German tourist arrivals to the South Cyprus. Conditional Granger causality tests confirmed causation that runs from real income and relative prices to tourist arrivals from mainlands of Turkey and Greece to both parts of Cyprus in the long-term.