Impacts and implications of a pandemic on tourism demand in Indonesia

Abstract

. This paper estimates the economic losses in Indonesia's tourism sector due to the COVID-19 pandemic using an Autoregressive Integrated Moving Average Model (SARIMA). Additionally, an autoregressive distributed lag model (ARDL) is employed to estimate the demand for tourism in Indonesia from the six largest inbound tourist countries, from 1989 to 2019. The results predict a decrease of nearly 16.65 million tourists and a potential loss of US$19.07 billion from January 2020-March 2021. Income per capita, relative prices, and substitution prices significantly impact the demand from overseas travelers for tourism opportunities in Indonesia. Tourism in Indonesia is considered as a luxury with a competitive price. The country could capitalize on the high willingness to pay of foreign tourists, strong income elasticity, and a positive perception of Chinese tourists. Complementary promotion policies from neighboring countries could help to attract more Chinese visitors. Inbound tourism from India may experience the largest negative impact from COVID-19 due to the large income elasticity, negative price elasticity, and a possible substitution in destinations amid changes in prices. Tourists from Singapore and Australia may soon revisit as they see Indonesia as an inexpensive destination. Japan may revisit depending on whether tourism prices in Indonesia remain competitive or not. Policy makers may investigate non-price policies as price-oriented ones will not be very effective.