The effect of North Korea on South Korean tourism demand: A novel application of destination image effect

Eunyoung Noh, Purdue University

Abstract

Tourism has become the number one industry in many countries representing the fastest growing economic sector in terms of job creation, foreign exchange earnings, and accounting for a significant share of their gross domestic product. Due to the economic impact, effective tourism planning has become vital for many destination countries. A primary tool for effective planning is accurate forecasts of tourism demand and impacts. To improve tourism forecasting accuracy, previous studies have included the effects of factors such as disasters, international politics, advertising effects, and other non-economic events. Until recently, econometric forecasting models have not taken into account the impact of a destinations image on tourism demand. Destination image is widely accepted as important for tourism development as destinations strive to be perceived as a safe, clean, friendly place to visit. Perceived image, has traditionally been considered a qualitative factor, with quantification efforts limited to focused studies of specific events or time points. The Dynamic Destination Image Index (DDII) was proposed by Stepchencova (2009) as a continuous proxy for the perceived image of a destination in an origin country. The measure of image proposed in Stepchencova (2009) represents a method of deriving a continuous measure of destination image from newspapers in origin countries. Content analysis was used to evaluate and quantify news articles about destination countries appearing in newspapers widely circulated in the tourism generating country. Since the index uses daily media sources over an extensive period of time, the DDII presents destination image as a numeric time-series-based data and absolute figure, and can be applied in an econometric model as an independent variable to improve the R-square value of the model. This study utilized the DDII methodology to determine if the activities of a country with close geopolitical ties to a destination country have a significant impact on tourism demand. The DDII of North Korea in the US market was created for inclusion in an econometric model developed to estimate tourism demand for South Korea from the US. Unlike Stepchenkova’s study that demonstrate how changes in the destination image of Russia influence that country’s inbound tourism, this research investigated how the image of a neighboring country (North Korea) can impact the level of visitation to a destination country (South Korea). News articles about North Korea, published in the US market, were analyzed to construct DDII-North Korea, which was then added to the forecasting model of US arrivals to South Korea. The model including the DDII of North Korea was compared to the base model which included income, price, past tourist arrivals, seasonality and dummy variables for specific events such as Sep 11th terrorist attack. This research found that including the DDII-North Korea significantly improved the fit of the base model, with the impact being of the direction and magnitude expected. It does appear that the activities of North Korea significantly affect the level of US visitation to South Korea. The coefficient of the model with DDII indicated that an increase of 10 index units (ranged from 0 to 100) is associated with 440 US visitors to South Korea per month. This finding on the monthly variations of the US arrivals quantifies the effects of a previously accepted but untested concept and should be useful for tourism planners in general and in South Korea specifically.

Degree

M.S.

Advisors

Ismail, Purdue University.

Subject Area

Management|Recreation

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