Visiting friends and relatives tourism: the case of Uruguay

In this paper, we analyze Uruguayans living abroad that visit Uruguay for their holidays, what in the literature is called Nostalgic tourism or Visiting friends and relatives (VFR) tourism. Several studies point Uruguay as one of the South American countries with the largest proportion of its population living abroad. In addition, tourism is a very important economic activity in Uruguay. Visitors from Argentina have been always the majority in the Uruguayan inbound tourism. During 2017 in Uruguay 68% of total tourists were Argentinians, 12,5% Brazilians, and 8% VFR tourists. This last share was near 16% during the first decade of this century and even higher in the XXth. century. We analyze and estimate the VFR tourism demand in Uruguay, and compare it with Argentinian tourist demand, since the majority of VFR tourists live in Argentina (64%). After characterizing VFR tourists, we apply Johansen methodology and built four models: two for VFR tourism and two for Argentinian tourism, considering monthly data for the number of tourists and quarterly data for tourists expenditure. Applying Johansen methodology, we found at least one Vector error-correction model (VEC) equation for each model considered. In the first two models (taking into account the number of tourists), the elasticities (income and prices) were smaller for VFR tourists compared with Argentinian tourists, meaning that the number of VFR tourists react less to changes in income or relative prices than Argentinians. But in the case of tourists expenditure, the result was the opposite, with VFR tourists responding more to changes in prices or income than Argentinians. Impulse response functions show a greater reaction of Argentinian tourists to changes in relative prices, but similar in the case of an income shock. Finally, forecasts show a good adjust of the forecast to actual data.