Tourism in Galicia: Domestic and Foreign Demand

Transcription

1 Tourism in Galicia: Domestic and Foreign Demand Teresa Garín-Muñoz. Universidad Nacional de Educación a Distancia (UNED) Madrid, Spain mgarin@cee.uned.es This paper analyses the main determinants of the demand for tourism in Galicia and quantifies their incidence. We elaborate two models depending on the origin (domestic or foreign) of the tourists. For the domestic demand, we use a panel of annual data on the 17 regions of origin of tourists during the period For the international demand, we use another annual panel of 24 countries of origin of tourists for the same period. The estimated elasticities suggest that both domestic and foreign tourism in Galicia is very sensitive to income in the origin markets and to prices. Other findings are the dependence of domestic tourism on its own past and the sensitivity of tourism to the celebration of the Holy Year. The results may be useful for helping professionals and policy makers in the decision making process. Keywords: Tourism demand; Domestic demand; Foreign demad; Panel data; Elasticities Acknowledgments: I am grateful for suggestions and comments from T. Pérez-Amaral and M. McAleer. The remaining errors are my sole responsibility.

2 Introduction Tourism constitutes an essential sector for the Spanish economy. According to data of the Tourism Satellite Account (CST 2004), tourism generates 11% of the Spanish GDP and 10% of total employment. However, tourism is not homogenously distributed across the country. Differences between regions arise not just in terms of volume of tourism, but also of composition (domestic vs. international) and type of tourism (business, leisure, religious, etc). On top of that, the tourism policy in Spain has been transferred to the autonomous communities, so the interest of studying the tourism activity from the perspective of the different regions is clear. This study presents a view of the tourism activity in Galicia, emphasizing its main characteristics and modelling tourism demand. Galicia is one of the seventeen Spanish autonomous regions. Its Km 2 surface area 1 makes up 5.8% of Spain s territory. The capital is Santiago de Compostela and the territory is divided into four provinces: A Coruña, Lugo, Ourense and Pontevedra. It is located in the northwest of Spain and is bordered on the south by Portugal (see red area in the map). 1 The surface area of Galicia is similar to Belgium or to the European part of Turkey. 2

3 Galicia is a region dominated by the sea with a very extensive coastline (1 309 Km long); the Cantabrian Sea (Bay of Biscay) bathes the northern coast and the Atlantic Ocean the western coast. One of the most remarkable elements are the rías, river valleys flooded by the sea whose waters contain important fishing resources. Galicia has a population of inhabitants with a density of 93 inhabitants per square kilometre. The main demographic features are the negative vegetative growth and the high degree of demographic imbalance, both demographically and economically. The recent evolution of tourism in Galicia shows that it is an important economic sector for the region. At the beginning of the 1990 s tourism represented about 4 percent of the GDP; however during the year 2004 the percentage has risen to Tourism has also been consolidated as one of the most important sources of employment for Galicia. According to 2004 data, tourism accounts for 13.3% of total employment. Finally, of special mention is the fact that taxes from the tourism activity represent 14.7% of the total taxes. Both its economic importance and its evolution justify the interest of this study. There are previous studies that analyse different aspects of tourism in Galicia (Abad, 2003; Besteiro, 2003, 2004, 2006; Martínez & Miguel, 2000; Martínez el al., 2006; Rodríguez & Guisado, 2001). A significant number of previous studies have concentrated on rural tourism (Abad, 2003; Besteiro, 2006; Martínez et al., 2006), probably because this type of tourism has been perceived as a way for developing inland and rural regions in order to attain a greater redistribution of income and population. There are also several studies devoted either to specific types of tourism (Besteiro, 2004, 2006) or to specific areas (Besteiro, 2003). In this paper we elaborate two different models depending on the origin (domestic or foreign) of the tourists. The results may be valuable for professionals and policy-makers in the decision making process. Studies of this type have been done for several other regions of Spain, e.g. Canary Islands (Garín, 2006), Balearic Islands (Garín & Montero, 2007) and Madrid (Garín, 2004). 2 IMPACTUR 2004 (Exceltur). 3

4 This paper is organized as follows. Section 2 describes the conditions for tourism development and some potential strategies for increasing tourism activity. The data sources and the salient features of the tourism arriving in Galicia are shown in Section 3. In Section 4 we present two demand models, one of them for the domestic demand for tourism and the other for the international demand. The empirical results and their economic interpretation are also given in this section. Conclusions and policy implications of the results are shown in Section Conditions for tourism development. The basic conditions for tourism development of a destination can be divided into two categories. First, tourism development depends on the internal attributes of the destination. This category would include the natural and historical assets, the supply of a range of competitive products and the accessibility of the destination. Second, tourism in a destination depends on its external attributes, which means that tourism is also affected by the image or perception of the destination in the outside world. Natural beauties are one of the reasons for visiting Galicia. The coastline is formed by tiny coves, beautiful sandy beaches (750 beaches and 250 kilometres of fine white sand) flanked by cliffs, and fishing ports built around sheltered harbours. Inland the region is green and wooded, especially along the valleys where trees overlook lush meadows and orchards. All these natural attributes, together with a large number of hot springs, are the main assets of the region as a tourism destination. Thanks to these features, there is place for the potential development of rural, adventure, nautical, gastronomic, beach, and health and spa tourism. The historical heritage is also an important complement to the offerings of Galicia as a tourist destination. In fact, the role played by Galicia in the history of medieval culture is extraordinary and it was famous throughout the Middle Ages owing to the Way of St. James, the main pilgrimage route in Europe to the tomb of St. James the Apostle. Consequently important monuments and buildings still remain. One of the most 4

5 emblematic monuments is the Cathedral of Santiago de Compostela 3. Each year, many thousands of people from all over the world are drawn to Galicia to make the ancient pilgrimage to Compostela. The flow is especially high during the Holy Years of Santiago, which occur when the 25th of July, the celebration of the martyrdom of St. James, falls on a Sunday. These historical assets make Galicia a potentially important religious and cultural tourism destination. Another important factor for tourism development is accessibility. Accessibility by road from the rest of Spain (say, Madrid) and from Portugal was difficult until very recently. Today, several roads (freeways) have been constructed that reduce the journey considerably. Efforts need to be made in order to improve accessibility by train. In terms of air communications, the three international airports (Santiago de Compostela, Vigo and A Coruña) are very convenient for foreign and domestic tourism. However, there is still room for improvement of air communications by promoting the introduction of low cost carriers (LCC). Right now, the presence of LCC is scarce 4. It is important to improve the conditions of the airports so they will appeal to these companies and be competitive with the neighbouring airport of Porto (Portugal). The supply of accommodation is characterized by the existence of a few very high-category hotels and an abundance of low-class accommodation establishments. A detailed classification of the number of establishments and places is shown in Figure 1. 3 Santiago de Compostela is the most visited place in Galicia. It was declared a UNESCO World Heritage Site in Right now, just three airlines operate from Galicia airports (Ryanair, Air Berlin and Clickair) and they are mostly concentrated in the airport of Santiago de Compostela. 5

6 FIGURE 1 Accommodation supply by category. EOH (2006) Five Star 2% Others 31% Four Star 17% Three Star 17% One Star 16% Two Star 17% Using the star classification, it can be observed that during 2006 the number of hotel beds corresponding to the high and medium categories (five, four and three stars) accounted for 36 percent of the total supply. Recently, efforts have been made to change this structure in favour of higher-category establishments. In fact, during the analysed period ( ), steady improvement has been observed in this sense. At the beginning of the period the percentage of beds in hotels of high and medium categories was 30 percent. A change in the supply would make it possible to host more business and congress events, with a resulting increase in average tourist revenue. In terms of supply, we should mention the fast growth of the thermal and spa establishments (2900 beds in 2004, the highest in Spain). However, the internal attributes of the destination are a necessary but not sufficient condition for tourism development. The destination has to be known by its potential visitors. People make the choice according to the information they have on the destination. In this sense, the region s tourism agency, Tourgalicia, is making serious efforts to improve and disseminate the image of Galicia. 6

7 3. Data source and description Based on data from the period we study the main characteristics of tourism arriving in Galicia. We have data disaggregated by types of accommodation selected by the visitors (hotel, camping, rural accommodation or tourism apartment), by the number of visitors and by nights. Before we begin to analyse the data, it should be noted that the years 1999 and 2004 of the sample were Holy Years. Table 1 shows figures on the number of visitors and the number of nights for the eight years. Table 1 Number of visitors / 01 Hotel establishments % Camping % Rural accommodations NA NA % Tourism apartments NA % Overnight stays / 2001 Hotel establishments % Camping % Rural accommodations NA NA % Tourism apartments NA % By using the years available for all types of accommodation ( ), several conclusions can be drawn: 1. Most of the visitors choose hotel establishments. According to data on 2006, the percentage of visitors in hotels represented almost 90% of the total. 2. Tourism apartments represent a low share of the total accommodations (1%). A significant number of these establishments are probably not declared. 3. An increase of tourism is observed for all kinds of accommodations (either by 7

8 number of visitors or by number of nights) and especially for rural accommodations, with an increase of 56% between 2001 and The increase in the number of visitors in hotels was 42.8% (the corresponding increase in the number of nights was 32.6%). For the rest of the analysis, we use data on the number of overnight stays in hotels from Encuesta de Ocupación Hotelera (EOH) of the Instituto Nacional de Estadística of Spain (INE). Specifically, we study the volume of tourism, its geographical composition, its seasonal distribution, and its evolution during the period Volume and evolution of tourism. According to EOH (2006), the volume of tourism in Galicia during 2006 was visitors and overnight stays. The average length of stay was 2.16 nights (the length of stay for the same year for the whole of Spain was 3.26 nights). This difference may be explained because Galicia is not a typical sun and sea 5 destination as is Spain as a whole. It is also important to note that the average length of stay has been very stable during the analysed period. As shown in Figure 2, during the sample period, tourism evolution was very positive. During the period , tourism to Galicia increased by 32.7% (measured by the number of overnight stays). However, the rates of increase were different for domestic and international tourism. Domestic tourism increased by 32%, whereas the international tourism increase was about 37%. Important differences in the evolution of tourism can be found between the different countries of origin. Some of the most important countries in terms of volume, with a rate of growth above the average during the sample period are: Italy (99%), United Kingdom (66%), and France (59%). 5 Because the weather is not very mild (rainfall is above the Spanish average), Galicia has a very short beach season and cannot be considered as a sun and sea destination. 8

9 FIGURE 2 Tourism evolution in Galicia. (EOH, ) Overnight stays years Spanish residents Foreign residents Total Composition of tourism. According to EOH data (2006), most of the tourism arriving in Galicia is domestic. In fact, 84% of the overnight stays are generated by Spanish residents and 16% by foreign tourists. It is also remarkable to note the importance of Galicia residents as generators of tourism with 30% of the nights. Figures 3 and 4 show the distribution of tourism by markets of origin. Domestic tourism to Galicia is very concentrated by markets of origin. The most important origin is Madrid with a share of 15%. A detailed breakdown of the origins of domestic tourism is shown in Figure 3. 9

10 FIGURE 3 Overnight stays by markets of origin. EOH, 2006 Madrid 15% Galicia 30% Foreigners 16% Rest of Spain 54% Castile and Leon 6% Catalonia 6% Andalusia 5% Asturias 5% Basque Country 4% Valencian Com. 3% Castile-LaMancha 2% Others 8% 0% Tourism from abroad is scarce and heavily concentrated by origin. The case of Portugal deserves special mention, with a market share of 28%, followed by Italy, Germany, France and the UK. For tourism composition, see Figure 4. FIGURE 4 International tourism by countries of origin. EOH, 2006 Rest of the world 31% Portugal 28% United States 5% United Kingdom 7% France 9% Germany 10% Italy 10% 10

11 Demand seasonality. The monthly distribution of tourism shown in Figure 5 shows that most tourism arrives in Galicia during the summer. In fact, more than half of the overnight stays take place during the summer months, and August is the month with the greatest volume of tourism. In order to avoid this instability, marketers could encourage a distribution of segments that minimizes the fluctuations. FIGURE 5 Monthly profile of tourism. EOH, N. Overnight stays January February March April May June July Augost September October November December According to the above results, several recommendations can be proposed to increase the level of tourism demand. First, in order to alleviate seasonality, it would be advisable to promote other kinds of tourism that are not so dependent on weather. This would be the case of business, thermal and spa, golf, nautical, religious or gastronomic tourism. Moreover, these alternative kinds of tourism generate higher average revenues Second, it would be advisable to diversify risks by avoiding extreme dependence on the economic situation of any single origin market. In other words, care must be taken with the enormous dependence on the Madrid market (among the domestic origins) and on Portugal. Promotional campaigns must also target other domestic and foreign origins. Third, revenues from tourism can also be augmented by increasing the length of the stay. In order to increase the average duration of the stay, it would be useful to extend the number 11

12 of amenities and possibilities for the visitor. It is possible that thermal tourism can help to fulfil this goal. Several measures in these recommended directions are now being explored by the local authorities. The local tourism agency, Turgalicia, is now trying to promote spa and nautical tourism with a special campaign under the slogan Water in Galicia, water of life. Also for this purpose, the II International Congress on Thermalism and the II Meeting on Thermal Towns have recently been organized. Also remarkable are the efforts being made to introduce Galicia into the international, and especially the German, tourist circuits. There is also an increasing interest in the promotion of gastronomic tourism. Even though there is little research on this kind of tourism, evidence suggests it is a niche growth market. Through the organization of gastronomic routes and festivals, local authorities try not only to attract high income visitors but also to level out the seasonal profile of tourism. 4. Models of the demand for tourism We want to model the main determinants of the volume of tourism to Galicia and their quantitative incidence. Given the differences between the reasons for travelling inside a country or abroad, two different models are estimated: one for domestic tourism and another for international tourism. In both cases, the proposed models are based on standard economic theory. That means that the demand for tourism, as the demand for any other good or service, basically depends on the price of the good and the consumer s income National demand model In order to explain the domestic demand for tourism in Galicia, we use a panel consisting of annual data on the 17 regions (autonomous communities) of origin of tourists during the 8- year period ( ). The use of this pooled time series/cross-sectional data set has been infrequent in the empirical literature on tourism demand until recently. However, this kind of data has several advantages when compared to the use of time series or cross-sectional data, such as a larger number of degrees of freedom, reduced multicolinearity, higher precision of the estimates and reduction of omitted variable bias. Another contribution of the paper is the 12

13 use of a dynamic model. As Morley (1998) points out, if the impact of past tourism is neglected, the effect of the relevant variables will tend to be overestimated (since the estimated coefficients will involve direct and indirect effects). Here previous numbers of tourists are included as explanatory variables. There are two main reasons for including previous values of tourism as an explanatory variable. One reason is that there is less uncertainty associated with holidaying in a destination that you are already familiar with, compared with travelling to a previously unvisited destination. The other reason is because knowledge of the destination spreads as people talk about their holiday, thereby reducing the uncertainty for potential visitors to that destination. Because of these reasons, if visitors are satisfied with a destination they may be more likely to come back and tell others about their favourable experiences. Hence, the parameter of the lagged dependent variable may be considered as a measure of habit formation. According to the classical literature on tourism demand modelling and taking into consideration the availability of data, the model to be estimated can be expressed as follows: ln Qdomestici, t = α i + β1 lnqi, t 1 + β 2 ln PTi, t + β 3 lngdpi, t + β4 D λ t + µ i + ε i, t (1) where i is a constant that is different for each region which takes into account the individual specific characteristics of the region as well as possible omitted variables. Qdomestic i,t is the number of overnight stays (per capita) of tourists from region i in year t. PT i,t is a price index constructed by dividing the price index of accommodation in Galicia in year t by the corresponding CPI of each of the autonomous communities of origin of the tourism. GDP i,t is the Gross Domestic Product (per capita) of region i during the year t. D2004 is a dummy for the Holy Year and takes the value 1 in 2004, and 0 elsewhere. The double logarithmic form is standard in this kind of work and allows for interpreting the 13

14 estimated coefficients as elasticities. According to the economic theory, we expect a negative sign for 2 and positive values for 1, 3 and 4. The estimation procedure is the Generalized Method of Moments of Arellano and Bond (1991). Using STATA v.8, we estimate the model and the results are shown in Table 2: Table 2. Estimation results of the dynamic model, Dependent variable: Logarithm of the number of overnight stays (per capita) Variables GMM-DIFF estimator of Arellano and Bond LnQdomestic i t (6.35) LnPT (-1.96) LnGDP 0.86 (2.19) D (10.29) Autocorrelation 2 nd order 0.95 Sargan (d.f.) 4.90 (5) Wald test (4) No. Observations 102 t-ratios in parentheses. The estimates are obtained by using the instruments Ln Q i t lagged up to two periods in order to reduce finite sample biases resulting from having too many instruments relative to the cross-sectional sample size (Alonso-Borrego et al., 1999). The estimated coefficients are short-run demand elasticities The long-run values are: income elasticity= 1.13 and price elasticity= The results show that habit persistence is important for modelling domestic tourism demand in Galicia. In fact 24% of domestic tourism is attributable to habit persistence and word-of-mouth effects. The estimated price elasticity ( 0.69) implies that domestic tourism arrivals are responsive to price fluctuations in hotel establishments. This means that the tourism sector must be 6 If long-run equilibrium is assumed, the following expression should be true: LnQ i t = LnQ i, t-1. The corresponding long-run elasticities have then been calculated by dividing each estimated coefficient by (1-1 ). 14

15 aware of maintaining or improving price competitiveness for sustaining or increasing national tourism flows. The estimated coefficient for the income variable is positive and significant (+0.86), showing that the demand for tourism in Galicia depends on the economic situation of the Spanish regions. Finally, the estimated value for the dummy variable D2004 (+0.23) confirms the sensitivity of domestic tourism to the celebration of the Holy Year. We have also explored the relevance of variables like: the price of travel between origin and destination, and the public expenditure on tourism promotion by the local authorities. However, none of them have been statistically significant. A possible reason for the insignificance of the price of travel as a determinant of the demand for domestic tourism in Galicia may be that travel represents a small proportion of the total price of the holiday, given that most of the visitors arrive by car. The insignificance of the promotional effort of the Galician government may be showing the ineffectiveness of the marketing campaigns or may be due to deficiency of the data. This data set does not let us know where the promotional campaigns are directed (we do not know if the expenditure is for domestic or international promotion of tourism). In the Appendix we present the results of Wald s test for omitted variables International demand model In order to explain the international demand for tourism in Galicia, we proceed in a similar way. The similarities include the kind of data, the set of explanatory variables, and the functional form. We use a panel of 24 countries of origin of tourists during the period Here we have 18 countries with data for the eight-year period and 6 countries with just six years of data. As a result, we use an unbalanced panel with 180 observations. We start with a dynamic model but we find that tourism from abroad does not seem to be dependent on past values of tourism. Then we estimate the following model: ln QForeign i, t = α i + β1 ln PTravel i, t + β 2 ln GDPi, t + β 3 D t + u i, t (2) 15

16 where i is a constant that is different for each country of origin which takes into account the individual specific characteristics as well as possible omitted variables. QForeign it is the number of overnight stays (in per capita terms) of tourists from country i during the year t. PTravel it is a price index constructed by multiplying the distance between origin and destination and the annual average crude oil price in real terms. GDP it is the Gross Domestic Product (in per capita terms) of country i during the year t. D2004 is a dummy for controlling the effects of the Holy Year. It takes the value 1 in 2004, and 0 elsewhere. t is a time trend that can serve as proxy for variables that affect the dependent variable and are not observable but are correlated with time (t= 1,, 8). Table 3. Estimation results for international tourism demand model ( ). Dependent variable: Logarithm of the number of overnight stays per capita (3) (1) (2) GLS with panel Variable Random effects GLS heteroskedasticity correction LnGDP 1.21 (6.70) 1.52 (16.92) 1.44 (26.53) LnPTravel (-3.92) (-17.96) (-27.44) D (2.94) 0.39 (1.80) 0.42 (4.25) t 0.13 (5.61) 0.22 (6.67) 0.19 (12.48) R 2 (overall) Wald test of joint significance No. of observations t-ratios in parentheses. Columns 1 to 3 of Table 3 show the results of the generalized least squares estimation of the model. Column (1) shows the random-effects estimates by using the GLS estimator (producing a matrix-weighted average of the between and within results). Columns (2) and (3) are estimated by using feasible generalized least squares. This procedure allows the 16

17 estimation both by assuming that panels are uncorrelated and also in the presence of heteroskedasticity across panels. While in column (2) panels are supposed to be homoskedastic, in column (3) we allow for heteroskedasticity across panels (countries) and a heteroskedasticity correction is introduced. The estimated coefficients are relatively close to each others, however we select the estimates in column (3) because of the correction for heterokedasticity and the values of the overall significance tests. Then we comment on the main conclusions based on the results of column (3). This is a double logarithmic model, so the coefficients are directly elasticities. The estimated income elasticity is positive and significant (+1.44), suggesting that the demand for tourism in Galicia is heavily dependent on the economic situation of the generating countries. A 1% increase in income in the origin markets leads to a 1.44% increase in tourism to Galicia. Thus it would make sense to try not to be very dependent on any single country. Promotion should target a variety of countries in order to diversify risks. The estimated price elasticity ( 0.96) implies that international tourism (measured by the number of overnight stays) is responsive to price. That means that fluctuations in the price of travel are going to have an important impact on the volume of tourism. In fact, a 1% increase in the price of travel leads to a 0.96% decrease in tourism to Galicia. Therefore, efforts could be made by local authorities to promote the establishment of low cost air carriers in the local airports. The coefficient of the Holy Year (+0.42) confirms the sensitivity of international tourism to Galicia to this celebration. Finally, the estimated coefficient for the trend is 0.19 and seems to be significant for international tourism demand in Galicia. This may be indicating that there are some other variables with effects on tourism. In our case there are several non-included factors that may positively affect tourism demand such as: level of infrastructures, changes in consumer preferences, tourism promotion, etc. 5. Conclusions and policy implications In this paper, we present an analysis of tourism in Galicia and its recent evolution. Based on 17

18 data of the EOH ( ), two different models have been elaborated in order to acquire a better knowledge of the responsiveness of demand to its most important determinants. One is for domestic demand and the other for international demand. From the descriptive analysis, we see that tourism in Galicia is generated predominantly by Spanish residents. However, the high rates of growth of tourism from abroad make an analysis of this kind of demand very appealing. The descriptive study reveals two other non-desirable characteristics of the tourism demand in Galicia. One is the short length of stay. The other is the predominance of low-category hotels. Both characteristics imply low levels of revenues derived from tourism. In this sense, tourism authorities need to devise policies designed to improve the attractiveness and quality of the supply. Several important recommendations can be made based on the demand models. First, given the price elasticities, the tourism sector must be aware of maintaining or improving price competitiveness for sustaining or increasing tourism flows. Second, according to the estimated income elasticities (0.86 for domestic demand; 1.44 for international demand), the policy makers must avoid being very dependent on any single market of origin. Diversification of marketing campaigns would be appropriate in order to avoid risks of a demand breakdown. The estimated coefficients are in line with our expectations according to the economic theory. As expected, price and income elasticities are larger for international demand than for domestic demand. In fact, according to our results, domestic tourism is a normal good whereas international tourism appears to be a luxury good. A possible line for further research is to study specific types of tourism in Galicia. When data availability so allows, it would be useful to study the health and spa tourism which is experiencing rapid growth. 18

19 REFERENCES Abad Romero, P. (2003). El turismo rural en Galicia. Revista Galega de Economía, vol. 12 (2), pp Alonso Borrego, C., Arellano, M., Symmetrically normalized instrumental-variable estimation using panel data. Journal of Business and Economic Statistics, 17 (January). Arellano, M. and Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies 58, Besteiro Rodríguez, B. (2003). El turismo de congresos y reuniones en la Comunidad Autónoma Gallega. Papers de Turisme, 33, pp Besteiro Rodríguez, B. (2004). El desarrollo del turismo náutico en Galicia. Cuadernos de Turismo, 13, pp Besteiro Rodríguez, B. (2006). El turismo rural en Galicia: Análisis de su evolución en la última década. Cuadernos de Turismo, 17, pp Exceltur. IMPACTUR Galicia Garín, T. (2004). Madrid as a Tourist Destination: Analysis and Modelization of Inbound Tourism. International Journal of Tourism Research, vol. 6 (4), pp Garín, T. (2006). Inbound International Tourism to Canary Islands - a dynamic panel data model. Tourism Management, vol. 27 (2), pp Garín, T. and Montero, L. (2007). Tourism in the Balearic Islands: A dynamic model for international demand using panel data. Tourism Management, vol. 28, pp INE. Encuesta de Ocupación Hotelera ( ) Martínez, F.; Miguel, J.C. de (2000). A demanda turística en Galicia. O problema da concentración, Revista Galega de Economía, vol. 9 (2), pp Martínez, F.; Rodríguez, X.A. (2006). Rural tourism demand in Galicia, Spain. Tourism Economics, vol.12 (1), pp

20 Morley, C.L. (1998). A dynamic international demand model. Annals of Tourism Research 25 (1), Rodríguez, M.M; Guisado, M. (2001). Consideraciones sobre a competividade do secor turístico en Galicia. Revista Galega de Economía, vol. 10 (2), pp APPENDIX Test for omitted variables for the domestic demand model Here we present the results of Wald tests of potentially omitted variables. One of those variables is the logarithm of the price of travel (ln P travel ) which has been approximated by multiplying the price of gasoline and the distance between origin and destination. In this case, a negative sign would be expected. We also consider the logarithm of public expenditure on tourism promotion (ln Prom) by the local authorities. The results in Table 5 show the insignificance of both variables for explaining domestic tourism to Galicia. Table 5. Omitted variables tests Variable Coefficient t-ratio ln P travel ln Prom