Restraining Seasonality in SIDs: New Pathways

The purpose of this study is to explore the drivers of the seasonal patterns of tourism demand in a small island destination. The study aims to mitigate the severe effects of seasonal fluctuations so pervasive in small island... [ view full abstract ]

The purpose of this study is to explore the drivers of the seasonal patterns of tourism demand in a small island destination. The study aims to mitigate the severe effects of seasonal fluctuations so pervasive in small island destinations. These seasonal fluctuations curtail productivity and profitability of tourism suppliers, and strain supply by overuse during a compressed time period. Seasonality, which is conventionally defined as a deviation from a common demand pattern, has mainly been examined from a one- to two-dimensional perspective. This is particularly revealed by the traditional weather effects or by those effects triggered due to traditional institutional factors, such as religious events (Christmas), school vacations, special events, etc.
This study claims that the drivers of seasonality are more complex revealing multiple interdependent and non-linear effects. In order to investigate this claim, the study used a five-step method including seasonal decomposition, time series-to-data panel transformation, panel unit root and multicollinearity test, and a two-stage least square regression following an endogenous test. The data collection was guided by the tourism demand literature and covered the period from 1994 to 2014. The study included own and substitute prices, transportation costs, income, consumer confidence, and tourism demand from competing markets. The study also included non-linear and non-constant effects on the periodically recurring forces affecting tourism demand. The case study is Aruba, a mature small island destination in the Caribbean that caters annually to over a million international tourists.
The results suggest that seasonality is triggered mainly by managerial decisions (i.e, price and marketing orientation) rather than the traditional factors, such as natural and institutional drivers. This is useful information for small island destination managers for two reasons. Traditional strategies addressing seasonality are based on differentiation efforts through product and customer mix. This strategy has proven to be costly and challenging to implement. The second reason is that island destination managers may directly control the aforementioned managerial decisions (pricing and marketing orientation) that may reduce seasonality. Thus, while weather may be beyond the control of destination managers, there are means by which to restrain the effects of seasonal tourism.