The role of promotion expenditures, direct flights and climate in island destinations

Abstract

The purpose of this study is to investigate the importance of promotion expenditures, direct flights, and climate, among other variables commonly used in gravity models, in the attractiveness of international tourists to an insular destination, in this particular case, Madeira. These three variables are rarely present in gravity models that analyse international demand. Given the possibility of endogeneity, a dynamic model is estimated for the annual panel data set of the 13 main tourist-generating markets for Madeira between 2005 and 2018. The results indicate that traditional gravity variables are significant in explaining international demand. They also show that promotion expenditures, climate, and the number of direct flights are important competitive factors. Promotion expenditures are of fundamental importance given the weight of the tourism sector in insular economic activity. Our results contribute to the debate that has already started about effective tourism policy making and strategies in the post-pandemic of COVID-19.