International tourism has since been recognized as a conduit for poverty alleviation and infrastructure development. Despite the sector’s importance in Africa in terms of its contribution to economic growth, foreign exchange earnings, and employment, very few studies have attempted to uncover its potential. In the case of Tanzania, where the sector’s importance rank high in the country’s development strategy, only two studies exist, and none on the factors that influence international tourism demand. Therefore, this study makes an important contribution to tourism economics literature in Africa by investigating the relevant determinants of international tourism demand using panel data for Tanzania’s top fifteen tourists’ source countries during the 2000–۲۰۱۶ period. Results, based on various panel data estimation techniques, indicate that income of tourists and infrastructure development in Tanzania, are the two main determinants of international tourism demand for Tanzania. These findings hold across model and sample specifications. From a policy perspective, the government of Tanzania and stakeholders should work towards making Tanzania tourism products more competitive by developing/improving infrastructure in the country. Moreover, there should be a policy that encourages developing tourism packages that fit the demands of tourists from relatively high income countries, and also make conscious efforts to market these products in the target countries. Lowering the cost of living and improving the exchange rate are also some of the areas that the government could work on to help grow the tourism industry.
Tanzania is endowed with rich and diverse natural resources (particularly; wildlife, forests, mountains and the rift valley) that form the mainstay of the country’s tourism industry. Almost a third of Tanzania’s land area is under government protection; and is reserved for the purpose of either national park, conservation area or game reserve. In total, Tanzania has 16 national and 2 marine parks, 28 game (including marine) reserves, 44 game controlled areas, multiple forest reserves, and one conservation area; which host the world’s renowned biodiversity, wildlife, and unique ecosystems (see Exhibit 1). Thus, it is not surprising that the tourism sector is one of Tanzania’s three growth sectors, and the second largest foreign exchange earner after agriculture. For example, in 2016 alone, it generated US$2.1 billion in revenues (4.7 percent of total GDP), employed approximately 3.9 percent of the country’s total labor force (equivalent to 470,500 jobs); and contributed about 21.4 and 8.7 percent of total export earnings (US $2,446.6 million) and investment (US$ 1.2 billion), respectively (WTTC – Tanzania, 2017). These economic benefits are amplified when linkages with allied sectors such as hospitality, manufacture of arts and crafts, and, transportation and logistics are taken into consideration. For instance, the total contribution of the sector to Tanzania’s GDP and employment in percentage terms in 2016, more than tripled that of direct contribution to roughly 13.5 and 11.6 percent, respectively (WTTC – Tanzania, 2017). Despite the aforementioned attractions and the increasing importance of tourism in the Tanzanian economy, tourism demand (both domestic and international) for Tanzania lags that of other African nations like Egypt, Morocco, Tunisia, and South Africa; and the sector’s total contribution to GDP growth also lags that of Uganda, Botswana, Senegal, Namibia, Kenya, and Republic of Congo (Naudé and Saayman, 2005; WTTC – Tanzania, 2017). Moreover, the Tanzanian tourism products are becoming increasingly noncompetitive in comparison to North African countries, South Africa, Botswana and Kenya.