Demand forecasting has the purpose of estimating future demand based on past data (Joun, 2003). Tourism demand forecasting is a very important tool for planning and decision making at national and enterprise level (Tuner & Witt, 2001). Therefore, conducting accurate demand forecasts helps minimize management risks and losses, and ultimately improves profitability, in order to help management decisions and manage the future efficiently (Song & Witt, 2003). The accuracy of forecasting can be improved by establishing a suitable tourism demand forecasting model.
Various studies have been conducted to predict accurate and effective tourism demand. Demand forecasting in the tourism industry is mostly based on causal model predictions and time series forecasting, which are representative quantitative methods. The time series prediction method is a method to predict the future by analyzing patterns and trends based on accumulated data from the past over time. The model using the long-term equilibrium relation between the time series variables is representative of the time series prediction method. In order to predict the future through the past data, it is frequently used in the forecasting of tourism demand. However, there are limitations on the method of determining the determinants of tourism demand (Song & Witt, 2006; Mo, 2009; Kim, 2014a, b). The causal model prediction method explores the relationship between tourism demand and decision variables, but disadvantage is that it only estimates static relationships at specific time points (Kim, 2014a). In order to solve this shortcoming, panel data analysis method is predominantly used in predicting tourism demand in recent years.
Hallyu (Korean wave)
Korea Tourism Organization (2012) defines Korean Wave as “a favorite phenomenon of Korean popular culture abroad”. The Korean Wave has a multifaceted nature of cultural phenomena and economic phenomena, and is thus defined in a variety of ways because of its different viewpoints. As for the economic effects of the Korean Wave, the content export effect, the export effect of other industries, and the tourism effect are shown, and the economic ripple effect can be expected from this (Lee, 2011).
‘Hallyu tourism’ means that foreigners visit Korea and visit Hallyu tourist attractions due to the influence of this Korean wave. In the mid-1990s, Korean dramas attracted Japanese interest, and this interest is the starting point for the Korean Wave tourism that Japanese people visited Korea and visited the drama shooting location (Lee, 2011). Hallyu tourism is divided into broad meaning and narrow meaning depending on the activities of tourists. Narrow Korean wave tourism means tourism that participates in tourism activities directly related to Korean Wave, such as foreign tourists who are interested in Korean Wave, visiting film and drama shooting sites, participating in meetings with fans, and participating in performances related to K-Pop. In the broad sense of Korean Wave tourism, foreign tourists who visit Korea do not participate in tourism activities directly related to Korean Wave, but their direct reason for visiting Korea is their interest in Korean Wave. In a similar vein, films from the United States and Australia show attractive tourism incentives. In other words, the film has become a fascinating tourist attraction. The viewer who watched the movie has an interest in the country where the movie was made, so that the viewer of the movie is now turned into a tourist and visits the country. This is generally called movie tourism and has long been recognized as one of the factors that enhance tourism attractiveness (Ko, 2009). Film tourism, or film-induced tourism, is defined as a business that attracts visitors through stories associated with scenes and locations of places that appear in movies, dramas, music, and so on. In summary, it refers to the commercialization of set and shooting sites in connection with movies and dramas. Film tourism is one of the modern cultural tourism, and it is an important tourist product (Ko, 2009).
According to Mintel (2003), one in five tourists visiting the UK found Britain inspired by British television programs and movies, and 50% of those who visited Scotland chose Scotland as their summer resort by Scottish TV dramas and movies. In New Zealand, the number of foreign tourists increased by an annual average of 5.6% after the opening of the movie ‘The Lord of the Rings’ in 2001, and 9% of tourists were affected by the movie (Mintel, 2003). Although the perception of movie tourism is quite widespread, recently tourism agencies are making marketing efforts to profit by utilizing movie tourism, such as making videos or film maps to attract tourists (Riley & Dorenl, 1992). However, in the tourism sector, efforts to identify the effects of such movies on the number of tourists or tourism income were insufficient compared to other industries.
In Korea, the number of tourists is increasing due to the Korean Wave. As an example, the number of Japanese tourists who visited Korea in 2004 after broadcasting the Korean drama “Winter Sonata” in Japan NHK increased by 35.5% compared to 2003. According to the Korea Tourism Organization (KTO) survey in 2004, 47% of the respondents answered that they had visited Korea due to the influence of Korean drama. Due to the popularity of TV dramas such as Daejanggum, Autumn Fairy Tale, and Winter Sonata, the Korean Wave craze has led to Korean Wave tourism. As the Korean Wave has been reorganized into K-pop in dramas according to the times, there is an increasing number of Korean wave tourists entering Korea to watch K-pop concerts. In addition to raising awareness of Korea due to Korean Wave such as drama and K-pop, interest in Korean food, cosmetics, fashion, Korean language learning and Korean culture is also increasing. This leads to K-pop concerts, concert tours, shopping, language training and cultural tourism through visits to Korea. The popularity of Korean Wave and the number of foreign tourists are rapidly increasing. The genre of Korean Wave has also been diversified from drama to K-Pop, broadcasting programs, online games, performances and movies. Due to the influence of the Korean wave, Korea’s export of large-scale cultural contents (movies, broadcast programs, games) has grown by more than 40% every year since 2001.
In the study of Song & Song (2006), the origin of Korean wave tour is said to be popular culture content. Ko (2012) also addressed that Korean wave is formed through Korean popular culture content and is closely related to content competitiveness. Therefore, it can be interpreted that the extent to which Korean pop culture content is exported depends on the degree of competitiveness of Korean pop culture in exporting countries.
As we have seen above, in the case of existing Hallyu-related researches, most of them use the questionnaire to try to find out the visitor’s revisit intention to Korea or the image of the Korean wave. Thus, the research using panel data on the influence of Korean Wave on tourism demand is insufficient. Therefore, a prediction model of how the Korean Wave in China, America, Japan and Hong Kong affects Korea ‘s tourism demand is needed.
Other predictors (income, customer price index, currency exchanege rate)
In the study of domestic and foreign research on the determinants of international tourism demand, the most important determinant of tourism demand is ‘income’ (Qu & Lam, 1997; Park 2009a, b; Song & Song, 2006). In addition, most previous studies use GDP or per capita GDP as proxy variables to measure income (Lim, 1997). Consumer prices were also analyzed as an important determinant of tourism demand (Lee et al., 1996). According to economic theory, demand and price are inversely related if other conditions are constant. Therefore, the higher the price of tourism products and services in the target countries, the more likely the tourism demand will decrease (Song & Song, 2006). Most of the previous studies have used the CPI as a proxy for travel prices. In relation to prices affecting tourist demand, the exchange rate affects the price level of a tourist country, and tourists are more aware of exchange rate fluctuations than price fluctuations. There are also a number of studies that have explored the importance of exchange rates in this respect (Uysal, 1998; Mo, 2010; Park, 2009a, b). In terms of the determinants of international tourism demand, the exchange rate is included as part of the travel price (Mo, 2004; Song & Song, 2006) or is used as a separate independent variable (Lim, 1997; Park, 2009a, b; Mo, 2010). Kim (2011) used the exchange rate against the dollar in the study of the economic ripple effects on tourism demand, and Kim (2014b) and Kim (2014a) used the annualized exchange rate against the won.