Tourism Analysis, Vol. 14, pp. 375–385 1083-5423/09 $60.00 + .00 Printed in the USA. All rights reserved. Copyright  2009 Cognizant Comm. Corp. www.cognizantcommunication.com THE DETERMINANTS OF TOURISM DEMAND IN SOUTH AFRICA USING A DYNAMIC PANEL DATA APPROACH RAMESH DURBARRY,* J. F. NICOLAS,† and BOOPEN SEETANAH‡ *Department of Tourism, Leisure and Sport, University of Bedfordshire, Bedford, UK †Faculty of Social Studies and Humanities, University of Mauritius, Reduit, Republic of Mauritius ‡Faculty of Law and Management, University of Mauritius, Reduit, Republic of Mauritius This article models inbound tourism demand for South Africa using a theoretical framework that is based on the gravity model and provides elasticity estimates that are useful for policy purposes. It uses a well-established gravity model following Anderson and van Wincoop’s model (2003) to explain tourism flows. The article departs from most of the existing work estimating tourism demand and builds on the recent work of Durbarry, but employs a dynamic panel data setting. The results show that tourists are not too sensitive to changes in the tourism price of South Africa, indicating that it offers a unique product and experience to tourists. In fact, evidence tends to suggest that competing destinations may imploy tourism products that are unique to their destina- tions in the region. The level of development and tourism infrastructure also affect arrivals. It is also found that distance negatively affects arrivals, but common border and language play an important role. The dynamic model supports the presence of repeat tourism and positive word-of- mouth, particularly from European and American origins. Key words: Tourism demand; Dynamic panel data; South Africa Introduction velopment of basic infrastructure, (c) attracting foreign investment (especially in hotels and re- sorts), and (d) facilitating transfer of technology. Tourism is the world’s largest and fastest- growing industry, accounting for more than one- Studies from Sinclair (1998) and Durbarry (2002, 2004) among others have clearly spelled out and tenth of global gross domestic produce (GDP), employment, and capital formation (World Tourism established empirical evidence of the positive and significant effect of tourism on a destination’s Organization, 2003). Undoubtedly it does not only carry a sociocultural and political significance, but economy. As such, there exists a pool of research that has been devoted to the further study of the also plays an important role in (a) contributing to the growth of domestic industries that supply the tourism phenomenon, particularly to investigate its various determinants (Witt & Witt 1995; Lim, tourism industry, (b) the economic and technologi- cal development of nations by stimulating the de- 1997, provides a comprehensive literature survey). Address correspondence to Nicolas Ragodoo, Faculty of Social Studies and Humanities, University of Mauritius, Reduit, Republic of Mauritius. Tel: +230 454 10 41; Fax: +230 234 62 69; E-mail: ragodoo@utm.intnet.mu 375