Journal of Transport Geography 73 (2018) 163–171

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Journal of Transport Geography

journal homepage: www.elsevier.com/locate/jtrangeo

Critical review

Tourism demand, low cost carriers and European institutions: The case of T
Brussels
⁎
Anabela Santosa, , Michele Cincerab
a
Solvay Brussels School of Economics and Management, Université libre de Bruxelles, iCite, CP146, Av. F. D. Roosevelt 50, 1050 Brussels, Belgium
b
Solvay Brussels School of Economics and Management, Université libre de Bruxelles, iCite and ECARES, 1050 Brussels, Belgium

A R T I C LE I N FO A B S T R A C T

Keywords: The flow of tourism to a region is highly dependent on its accessibility and the cost of travel represents the main
Low cost carriers (LCC) economic factor explaining tourism demand. The arrival of low cost carriers (LCC), with cheaper air fares,
Tourism demand greatly leveraged the tourist flow around the world. However, as argued by some authors, if the destination is
European institutions unique the importance of accessibility could be less relevant. Using quarterly data from 2000 to 2015, the paper
Brussels
assesses the effect of LCC on tourism demand focusing on Brussels. The peculiarity of Brussels comes from the
JEL classification: high concentration of European and International institutions located in the city, which makes it a very inter-
C22 esting and singular case of research. Results reveal that LCC per se have a smaller positive effect on tourism
L93
demand for business purpose than the specific characteristic of Brussels. Indeed, the presence of European in-
L83
stitutions complements the higher availability of low air fares, especially for business travellers.

1. Introduction accessibility. Nevertheless, Celata (2007) suggested that accessibility is

According to the International Recommendations for Tourism Statistics
(United Nations, 2010:10), “tourism refers to the activity of visitors,
[which] is a traveller taking a trip to main destination outside his/her
usual environment, for less than a year, for any purpose1 (business,
leisure or other personal purpose) other than to be employed by a re-
sident entity in the country or place visited”. Since tourism includes the
concept of travelling, to “move between different geographic locations”
(United Nations, 2010:9), a transport system is a key determinant of
such activity and its development (Pridaux, 2000; Henderson, 2009).
Among the four categories of transport (air, road, rail and water),
air transport is the most used by long distance travellers (UNWTO,
2017). The development of air transport in Europe since the 1990s, has
been expressed in more connections and an increase in destinations and
flight frequencies, an outcome shaped by air policy liberalization which
stimulated the arrival of low cost carriers (LCC) (Grančay, 2010).2
Along with the sector's growth, measured by a higher number of pas-
sengers (Marazzo et al., 2010; Baker et al., 2015) or by more air traffic
(Profillidis and Botzoris, 2015), economic activity in destination
countries or regions has also expanded.
The flow of tourism to a region is highly dependent on its
only relevant when destinations with similar characteristics are com-
peting to attract tourists. Indeed, according to this author, if the des-
tination has unique characteristics, the attractiveness of this region
might not be totally dependent on its accessibility.
The aim of the present paper is to assess the effect of LCC activity on
tourism demand, based on the case study of Brussels. This city is unique
due to its status as a centre of political and economic decision-making,
with many European and International institutions established there
which could provide the special attraction effect suggested by Celata
(2007).
Using quarterly data from 2000 to 2015, we estimate a time series
regression model, where the dependent variable is the number of nights
spent in tourism accommodation in Brussels (tourism demand), and
independent variables are a set of economic and non-economic vari-
ables, such as tourists' income, relative price index, exchange rate,
market share of LCC and the size of European institutions. Additionally,
tourism demand is divided according to the purpose of the trip, with the
aim to assess differences between business and leisure travellers' be-
haviour.
The contribution and originality of the paper is twofold. First, to the
best of our knowledge there are no studies considering simultaneously

⁎
Corresponding author.
E-mail addresses: asantos@ulb.ac.be (A. Santos), mcincera@ulb.ac.be (M. Cincera).
1
“This scope is much wider than the traditional perception of tourists, which includes only those travelling for leisure” (United Nations, 2010:9).
2
“Air transport liberalization is a process of gradual abolition of limits on designation, capacity, frequency and tariff setting in civil aviation” (Grančay, 2010:73), started in the late
1970s and 1980 (Finger and Button, 2017).

https://doi.org/10.1016/j.jtrangeo.2018.04.026
Received 27 November 2017; Received in revised form 24 April 2018; Accepted 24 April 2018
Available online 14 June 2018
0966-6923/ © 2018 Elsevier Ltd. All rights reserved.
A. Santos, M. Cincera
the impact of International institution concentration and LCC on
tourism demand. Secondly, the scientific literature has usually quanti-
fied the effect of LCC on tourism demand without making any dis-
tinction as to the purpose of the trip. In the present study we will be
able to evaluate if business and leisure travellers react equally to some
selected economic factors.
The paper is structured as follows. After the introduction, Section 2
makes a brief review of the literature on the determinants of tourism
demand. Section 3 provides a description of tourism activity in Brussels
and air transport flow in Belgium. Section 4 describes the methodolo-
gical approach and data source. Section 5 presents the estimation re-
sults. Section 6 discusses the main conclusions.
2. Determinants of tourism demand
Tourism demand can be quantified by tourist arrivals/departures,
tourist expenditure/income, travel exports/imports, number of nights
spent in tourist accommodation and tourists' length of stay (Lim, 1997).
Review articles (e.g. Lim, 1997; Song and Li, 2008) highlighted as main
drivers affecting tourism demand: i) economic factors, related to pur-
chasing power and travel expenditure; and ii) qualitative attributes of
the destination. Travel expenditure includes the cost of transport and
expenditure at the destination, such as the cost of accommodation, food
and beverages and others related to the purpose of the trip (e.g. con-
ference fee, attractions, shopping, health, etc.). So in addition to the
cost of travelling by air, road, rail or water, tourists take into con-
sideration the cost of living at the destination, as well as their ability to
acquire services at the destination based on their income (Kwack, 1972;
Martin and Witt, 1987). Cost of living is usually measured by the re-
lative price index (ratio between prices in the destination country and
prices in the tourist's home country) and by the cost of money through
the exchange rate (Lim, 1997). To measure tourists' home country in-
come, in addition to traditional wages and salaries (Kwack, 1972; Chi,
2015), authors also used as proxy the GDP per capita (Dogru et al.,
2017; Tsui, 2017). Since price matters, prices in competing destinations
(substitute prices) are also important for destination choice (Martin and
Witt, 1988; Song and Li, 2008) when a country or region has the same
qualitative attributes.
As regards the cost of air transport, the main proxies are fare pay-
ments to the carrier (Kwack, 1972), the price of jet fuel (Zhang and Lu,
2013; Tsui, 2017) and the share of LCC in total passenger flows (Rey
et al., 2011; Tsui, 2017). A higher share of LCC is associated with a
lower average air fare, which has the potential to create additional and
new travelling demand. For example, Rey et al. (2011) point out that an
increase of 1% of tourists flying with a LCC leads to a rise of 0.18% per
capita in the number of tourist arrivals in Spain. Additionally, Tsui
(2017) reported that an increase of 10% in the total seat capacity
scheduled by LCC is associated with an increase in the number of do-
mestic guest nights between 0.5% and 8.3% in New Zealand.
Furthermore, the cheaper air fares offered by LCC can also motivate
tourists to spend more money at their travel destinations (Eugenio-
Martin and Inchausti-Sintes, 2016). Concerning sensitivity to price by
type of travellers, usually leisure travellers are more sensitive to price
changes in air fares (Hess and Polak, 2005; Kopsch, 2012) and in in-
come (Oum et al., 1986) compared to business travellers, who are
prepared to pay more for a trip by air since they save time (Ramjerdi
et al., 1997; Hess and Polak, 2005) and may have some costs paid by
employers. Indeed, the ability to save a considerable amount of time is a
decisive factor in choosing air transport (Zamparini and Reggiani,
2007) and usually leisure travellers are less concerned about travel time
than business travellers (Morrison and Winston, 1995). The use of a
LCC involves some complications when these airlines serve airports
some distance from the city, have lower flight frequency and less con-
venient flight times. These aspects mean LCC operations may not be as
relevant to business travellers (Dresner, 2006). Martínez-Garcia et al.
(2012), who studied the profile of business and leisure travellers via a
164
Journal of Transport Geography 73 (2018) 163–171
survey done in Girona-Costa Brava Airport in Spain's Catalonia region,
showed that only 8% of the travellers surveyed were using LCC for
business purposes.
In addition to economic factors, the literature also identified qua-
litative attributes as determining tourism demand. This non-economic
factor is associated with the specific characteristics of a destination and
is usually associated with the tourists' motivation and needs (Andriotis,
2011). Ritchie and Zins (1987) identified as the most important de-
terminants of leisure tourism's attractiveness in a region: i) natural
beauty and climate, namely proximity to lakes, rivers and sea or
mountains, as well as sunshine and pleasant weather; and ii) cultural
characteristics, such as architecture, history, traditions, handicrafts and
gastronomy. For cities far from the coast, cultural attributes can be an
important factor for attracting tourists to the region (Alonso, 2015).
Where destinations are geographically isolated, such as remote islands,
air transport can play an important role in ensuring access (Candela and
Figini, 2012).
3. Tourism activity in Brussels, international institutions and air
transport
Between 2000 and 2015, the number of nights spent in tourist ac-
commodation in the Brussels Region increased by 57%, reaching more
than 6.79 million in 2015 (Fig. 1). Business travellers have a higher
market share (Fig. 2), but they showed a smaller increase than leisure
tourists: 34% versus 99% between 2000 and 2015 (Fig. 1). Business
travellers are also more sensitive to macroeconomic shocks as can be
seen in Fig. 1, with a marked decrease in 2001, due to the September 11
attacks on the Twin Towers in New York, and in 2009, as the result of
the world recession. During 2003 and 2009, the closure of the Palais des
Congrès, the main convention centre in Brussels, for renovation and
expansion also had an impact on the position of the city as a destination
for international meetings (Observatoire du Tourisme à Bruxelles).
Also, the November 2015 Paris terrorist attacks, had a negative effect
on tourist accommodation occupancy rates in Brussels (Observatoire du
Tourisme à Bruxelles).
International tourists represent nearly 85% of the total nights in
tourist accommodation and they come mostly from Europe, namely
France, the United Kingdom, Spain, Germany, the Netherlands and Italy
(Table 1). Outside Europe, the USA is the main country from which
tourists come to stay in Brussels. Nevertheless, under the period in
analysis, the share of the seven main countries emitting tourist flows to
Brussels drop down 14 percentage point, suggesting that the city is
attracting travellers from more diverse origins. Among them we can
highlight those coming from BRIC countries (Brazil, Russia, India and
China), which represented in 2015 nearly 5% of the total number of
nights spent in tourist accommodation in Brussels (Observatoire du
Tourisme à Bruxelles). Table 1 also shows an increase of the national
Fig. 1. Number of nights (millions) in tourist accommodation in Brussels by
purpose, 2000–2015.
(Source: Authors' own elaboration based on data from Observatoire du Tourisme à
Bruxelles.)
A. Santos, M. Cincera Journal of Transport Geography 73 (2018) 163–171

held in Brussels (Fig. 5) makes it a top Conference Hub, ranking first in the
world in 2016 (Observatoire du Tourisme de Bruxelles). According to ICCA
(2010), the MICE destination is chosen based on the central position of the
city and the presence of international organizations. Cincera and Santos
(2016) also demonstrated that transport connecting the city to the rest of
the world is an important asset in attracting international meetings, con-
ferences, fairs and international exhibitions.
Note: The number of international meetings reported in UIA (Union
of International Associations) statistics refers to two categories of
meetings: i) organized by international organizations; and ii) not or-
ganized by international organizations but with significant interna-
tional character (at least 40% of the participants are from countries
Fig. 2. Number of nights (% total) in tourist accommodation in Brussels by
other than the host country and at least 5 nationalities are represented).
purpose, 2000–2015. Access to Brussels for leisure travellers is mainly by car (41%) and by
(Source: Authors' own elaboration based on data from Observatoire du Tourisme à plane (34%) (Toerisme Vlaanderen, 2012).4 Air passengers can arrive at
Bruxelles.) Brussels airport - Zaventem, located about 15 km from Brussels city centre-
which is the main gateway to Belgium for tourists coming from Germany,
the United Kingdom, Italy and Spain (Table 2) or at Brussels South –
Table 1
Number of nights in tourist accommodation in Brussels by national origin, Charleroi airport, situated 60 km from Brussels city centre, which is more
2000–2015. relevant for tourists coming from France, Italy and Spain.
Between 1998 and 2015, the flow of passengers through the two
Nationalities 2000 2003 2006 2009 2012 2015 Average
main Belgian Airports (Brussels-Zaventem and Brussels South
(2000–2015)
Charleroi) increased by 62%, reaching more than 30.4 million passen-
Belgium 9% 9% 13% 17% 19% 21% 15% gers in 2015 (Fig. 6).5 Nevertheless, in the last two decades, two main
International 91% 91% 87% 83% 81% 79% 85% breaks in the trend are visible. The first appeared in 2001/2002 as the
origins
result of two events: i) the bankruptcy of Sabena, the main national
Main international
origins airline operating in the country and responsible for 61% of passenger
France 11% 11% 12% 13% 13% 13% 12% air transport in 2001 (Burghouwt and Dobruszkes, 2014); and ii) the
United Kingdom 18% 18% 14% 10% 8% 8% 13% September 11 terrorist attacks. The second happened in 2008/2009, as
Germany 8% 8% 7% 8% 7% 7% 7% the consequence of the financial economic crisis of 2008. LCCs' re-
Spain 5% 5% 6% 7% 7% 6% 6%
presentation also increased significantly from 1998, reaching 35% in
USA 9% 7% 6% 6% 6% 6% 6%
Netherlands 7% 7% 7% 7% 5% 5% 6% 2015 (Fig. 7) and mainly due to activity at Brussels South-Charleroi.
Italy 5% 5% 4% 5% 5% 4% 4%
Subtotal 63% 61% 56% 56% 51% 49% 55% 4. Methodology and data
Other international 37% 39% 44% 44% 49% 51% 45%
origins (%)
Our model (Eq. (1)) estimates tourism demand (DT) in Brussels
Source: Authors' own elaboration based on data from Observatoire du Tourisme taking into account the main determinants highlighted in the literature
à Bruxelles. reviewed above: income in a tourist's home country (Y), share of LCC
(LCC), relative price (RP) index (ratio between prices in the destination
traveller's representativeness in tourist accommodation in Brussels. country and prices in the tourist's home country), currency exchange
Brussels attracts tourists under the concept of Urban Tourism as rate (ER) and qualitative attributes of the destination country (EC).
defined by Ashworth and Page (2011).3 On the one hand, the city has a Seasonality effect (S) and time fixed effect (T) for the most important
vast and rich historical and cultural heritage, unique gastronomy and events affecting tourism demand were also added in the model as done
an international reputation (Toerisme Vlaanderen, 2012). On the other by Tsui (2017) in order to control for other exogenous factors affecting
hand, Brussels is also known as the Capital of Europe, since many the dependent variable.
European institutions and international associations have their head- DT = f (Y , LCC , RP , ER, EC , S, T ) (1)
quarters or a branch in the city (see list in Fig. 3). This concentration of
institutions generates a great deal of business travel, as Brussels has the Tourism demand (DT) is measured by the number of nights in
status of a worldwide decision-making centre, alongside Tokyo and tourist accommodation in Brussels, total and by the main purpose of the
Washington (Gall, 2004), while its cultural-historical reputation could stay (business or leisure).The independent variables are as follows:
attract the Urban tourist described by Ashworth and Page (2011),
which both give Brussels a competitive advantage as an urban desti- – Income in the tourist's home country (Y) corresponds to the
nation (Jansen-Verbeke et al., 2005). weighted average GDP per capita in the seven main origin countries
The central position of the city also attracts a significant number of so- identified in Table 1.
called eurocrats, “European citizens working temporarily in Brussels and/or – Relative price index (RP) represents the cost of living in Belgium
attending meetings in Brussels on a very frequent basis”, which could have a compared to the tourist's country of origin. We used the Harmonized
positive effect on the tourism sector (Jansen-Verbeke et al., 2005:110). In Consumer Price Index (HCPI) as a proxy for the cost of living and
fact, the MICE (Meetings, Incentives, Conventions, and Events) market re- compared HCPI in Belgium with the weighted average HCPI in the
presents more than 70% of total overnight stays in Brussels for business seven main countries emitting tourist flows to Brussels. The HCPI
purposes (Fig. 4). The high number of meetings of international associations
4
Other means of transport are divided in high-speed train (9%), bus (8%) and normal
train (7%) (Toerisme Vlaanderen, 2012). Information about main transport of business
3
Urban tourism is a geographical demarcated tourism segment, associated not only tourists is not available.
with the cultural characteristics of a destination but also with several multifunctional 5
The other airports (Antwerpen, Kortrijk-Wevelgem, Liège and Ostend – Bruges) as
activities available in city areas, such as congresses, shopping or night-life (Ashworth and regards passenger flows only represent around 3% of total traffic (source: SPF Mobility
Page, 2011). and transports website https://mobilit.belgium.be).

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A. Santos, M. Cincera Journal of Transport Geography 73 (2018) 163–171

Fig. 3. European and international institutions located in Brussels.

(Source: Authors' own elaboration based on Brussels-Capital Region website (http://be.brussels– accessed on 27 February 2018).)

80% 72% 73% 73% economies sending tourists and using another currency (United
66% 69% 67%
Kingdom and USA) was also included in the model, taking into ac-
57%
60% count the weighted averages of both exchange rates. For this in-
43% dicator, Y and RP, we followed the same framework as Chi (2015)
40% 34% 31% 33%
28% 27% 27% using weighted averages.
– Qualitative attributes of the destination country (EC) is measured by
20%
the size of European institutions. Employees in the European
Commission (number) was used as a proxy to control for it.7 With
0%
2002 2004 2006 2008 2010 2012 2014 this variable we expect also to capture the effect of the MICE sector,8
since the choice of location for international conferences depends
MICE Other business reasons
also on the presence of international organizations (ICCA, 2010).
Fig. 4. Share of business overnight stays by purpose (% of total) in Brussels, – Share of LCC in total passenger flows in the two main airports (LCC)
2002–2014. is included as a proxy for the cost of transport.9
(Source: Authors' own elaboration based on data fromObservatoire du Tourisme à – Dummy variables for each quarter of the year were considered,
Bruxelles.) aiming to catch the seasonal effect (S) of tourism demand.
– Dummy variables for time fixed effect (T) of the most important
events affecting tourism demand, such as, NY terrorist attacks,
Sabena bankruptcy, global economic crisis, “Palais des Congrès”
closure and Paris terrorist attacks.

The study covers the period between the first quarter of 2000 to the
fourth quarter of 201510 and data comes from several sources: Ob-
servatoire du Tourisme à Bruxelles, Brussels Airport Company, Brussels
South Charleroi Airport, OECD, Eurostat, National Bank of Belgium and
European Commission. Table 3 provides a detailed description of

Fig. 5. Number of international meetings taking place in Brussels, 2000–2016.

(Source: Authors' own elaboration based on data fromObservatoire du Tourisme à
Bruxelles.)
used includes the price of all consumer goods and service items,
such as food, beverages, clothing, transport services, recreation,
culture, restaurants and hotels in Belgium.6
– The exchange rate (ER) between the Euro and the two main
6 10
HCPI monthly or quarterly data for the Brussels Region is not available, so we as-
sumed that price evolution is on average the same as in Belgium as a whole.
7
Time series statistics about the number of employees in other European and inter-
national institutions were not available. However, according to Cincera and Santos
(2016), European Commission staff represent approximately 50% of total employment in
European and International institutions in Brussels.
8
Quarterly or monthly data about the number of conferences and international
meetings held in the city are not available. Despite the availability of annual data, due to
the seasonality of these events it is not possible to extrapolate quarterly data.
9
We also estimated models including real imported crude oil price expressed in US
dollar per gallon but in no variant model is this variable significant (results available on
request).
One limitation of the study is the limited availability of monthly or quarterly data
before 2000, which shortened the period of analysis.

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A. Santos, M. Cincera Journal of Transport Geography 73 (2018) 163–171

Table 2
Airports where tourists visiting cities in Flanders or Brussels landed in 2011.
Arrival Airports TOTAL Germany France United Kingdom USA Japan Italy Spain

Brussels Airport – Zaventem (BE) 58.0% 86.2% 56.5% 84.5% 39.0% 10.5% 63.4% 65.2%
Brussels South – Charleroi (BE) 15.3% 13.8% 43.5% 0.9% 0.6% 1.1% 34.9% 29.3%
Amsterdam Airport – Schiphol (NL) 12.0% 0.0% 0.0% 10.7% 27.4% 43.4% 0.2% 1.5%
Paris – Orly/Charles de Gaulle (FR) 6.5% 0.0% 0.0% 0.0% 15.2% 17.3% 1.5% 1.2%
London – Heathrow/Gatwick/Stansted (GB) 3.4% 0.0% 0.0% 0.0% 11.3% 7.3% 0.0% 0.3%
Other airports in or outside Belgium 4.8% 0.0% 0.0% 3.9% 6.5% 20.4% 0.0% 2.5%

Source: Authors' own elaboration based on data provided by Toerisme Vlaanderen.

Note: Table reports the arrival airports for tourist visiting both Brussels and Flemish cities. The latter are closer to the Netherlands, whereas Brussels is about 200 km
by road from Amsterdam.

qualitative attributes of a destination country are not expected to have

an immediate impact, since a city's brand image or any change in it
takes times to filter down through tourists. For this reason, the size of
European institutions is lagged two periods of time. After all these
transformations, Eq. (1) is expressed as follows:

∆ log(DT )t = β0 + β1 ∆ log(LCC )t + β2 ∆ log(Y )t − 1 + β3 ∆ log(RP )t − 1

+ β3 ∆ log(ER)t − 1 + β4 ∆ log(EC )t − 2 + β5 NY Sabena
+ β6 Crisis + β6 Palais + β6 Paris + St + εt (2)

The model (2) was estimated through an Ordinary Least Squares

Fig. 6. N° of passengers, Brussels Zaventem and Brussels South-Charleroi air-
ports, 1998–2015.
(Source: Authors' own elaboration based on data provided by from Brussels Airport
and Brussels South-Charleroi airport.)
(OLS) method. Nevertheless, using this technique, we need to guarantee
that estimators are BLUE (Best Linear Unbiased Estimator) and effi-
cient. An estimator is considered BLUE if the three assumptions of the
Gauss-Markov theorem, concerning error random variable, are sa-
tisfied: error terms should be uncorrelated, with zero mean, common
and constant variance (Jeske, 1994). Serial correlation was assessed
using a Breusch-Godfrey test and heteroscedasticity (not constant var-
iance) by a Breusch-Pagan Test.

5. Results of the econometric model

Fig. 7. low cost carrier (% total), Brussels Zaventem and Brussels South-
Charleroi airports, 1998–2015. Note: LLC includes activity of both airports.
(Source: Authors' own elaboration based on data provided by from Brussels Airport
and Brussels South-Charleroi airport.)
variable definitions and sources.
Except dummy variables, the set of variables are all transformed
into natural logarithms and in first differences.11 This last correction
had to be made since the unit root tests (Table 4) revealed that most of
variables are not stationary at level.12 Indeed, one main concern when
we work with time series is to guarantee their stationarity, to be able to
perform standard statistical inference.
Furthermore, economic variables were also lagged one period be-
cause according to Toerisme Vlaanderen (2012), around 30% of tourists
visiting Brussels reserve their accommodation more than 3 months be-
fore and about 45% between 1 and 3 months before their trip. Also, the
11
First differences: Δxt = xt − xt−1 = xt − Axt = (1 − L)xt
12
Stationarity process refers to time series' property of having a mean and/or variance
unchanged over time. When time series are non-stationary this could lead to a spurious
regression problem, when variables show a significant relationship, due to the correlation
between trends, whereas there should be have.
Before estimating our model (Eq. (2)) with all the variables listed,
we started the analysis by estimating two simple models of tourism
demand with only the main determinants (LCC and EC) under assess-
ment. The first model (Eq. (3)) includes only market share of LCC and
the second (Eq. (4)) contains additionally the proxy variable for the size
of European institutions. In both model, the seasonality effect and time
fixed effect for the main important events affecting tourism demand in
Brussels were also added as control variables. The aims of this first
approach is to show the robustness of LCC effect and to assess its
complementary with the singularity of Brussels.
∆ log(DT )t = β0 + β1∆ log(LCC )t + β2 NY Sabena + β3 Crisis + β4 Palais
+ β5 Paris + St + εt (3)
∆ log(DT )t = β0 + β1 ∆ log(LCC )t + β2 ∆ log(EC )t − 2 + β3 NY Sabena
+ β4 Crisis + β5 Palais + β6 Paris + St + εt (4)
Table 5 reports the results of Eqs. (3) and (4). Tourism demand (DT)
can be expressed by the total number of nights spent at tourist ac-
commodation (columns 1 and 4) or by the number of nights spent by
the purpose of the stay: business (columns 2 and 5) or leisure (columns
3 and 6).
The results reported in column (1) of Table 5 reveal that an increase
of 10% in LCC market share is associated with an increase of 0.81% in
the number of nights spent in tourist accommodation in Brussels. When
a distinction is made as to the purpose of the stay in tourist accom-
modation (columns 2 and 3), the effect of LCC is revealed to be higher
for leisure travellers than for business ones (1.42% versus 0.89%). This
conclusion is in line with the findings in literature (e.g. Hess and Polak,
2005; Dresner, 2006; Kopsch, 2012), which showed that leisure

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A. Santos, M. Cincera Journal of Transport Geography 73 (2018) 163–171

Table 3
Variable definition and sources.
Name Description Source

DT – TT N° of nights spent at tourist accommodation Observatoire du Tourisme de Bruxelles

(all purposes) – thousands
DT – BUS N° of nights spent at tourist accommodation Observatoire du Tourisme de Bruxelles
(business) – thousands
DT – LEIS N° of nights spent at tourist accommodation Observatoire du Tourisme de Bruxelles
(leisure) – thousands
LCC Market share of LCC (% total passengers) Authors' own calculation based on data from Brussels-Zaventem and Brussels-
South Charleroi Airports
Y Weighted average GDP per capita, US dollar, constant prices, fixed PPPs, Authors' own calculation based on data from OECD http://www.oecd.org/
seasonally adjusted
RP Weighted average relative price index Authors' own calculation based on data from Eurostat
ER Weighted average exchange rate between Euro/US dollar and Euro/pound Authors' own calculation based on data from National Bank of Belgium
sterling
EC Number of employees at the European Commission (% active population in Authors' own calculation based on data from EC - DG Human Resources & Security
Brussels region) and Statistic Belgium https://statbel.fgov.be/en
NY_Sabena Binary variable that takes 1 for the year 2001, which includes the NY terrorist Authors' own calculation
attacks & Sabena bankruptcy; 0 otherwise
Palais Binary variable that takes 1 for the period of “Palais des Congrès” closure 2003 Authors' own calculation
to 2009; 0 otherwise
Crisis Binary variable that takes 1 for the period of global economic crisis in 2008 and Authors' own calculation
2009; 0 otherwise
Paris Binary variable that takes 1 for the period of Paris terrorist attacks which was Authors' own calculation
followed by a lock-down in 2015; 0 otherwise

Source: Authors' own elaboration.

Note: The annual number of employees in the European Commission was provided by the Human Resource department of this institution and quarterly data was
estimated by interpolation based on quarterly statistics of the total workforce in the Brussels-Capital Region.

Table 4 for business purposes and the magnitude of the effect is even higher
Test Statistic of Augmented Dickey-Fuller (ADF) test for unit root. than the one of LCC operation. No significant effect of this variable is
Variables Variables at level Variables in first difference found in the model assessing leisure tourism demand. This finding
shows evidence that the presence of European institutions is only an
Z(t) p-value Z(t) p-value important factor for business travellers, which makes sense given that
leisure travellers have different reasons to visit Brussels, e.g. cultural
Log (DT) −2.706 0.234 −3.966 0.010 ***
Log (DT - BUS) −2.413 0.373 −3.728 0.021 **
experience, gastronomy and shopping.
Log (DT - LEIS) −3.565 0.033 ** −3.809 0.016 ** Concerning the effect of other factors affecting tourism demand,
Log (LCC) −9.414 0.000 *** −4.892 0.000 *** Table 6 reports the results of the regression estimation of the complete
Log (Y) −2.494 0.331 −3.451 0.045 ** and main model reported in Eq. (2).
Log (RP) −1.921 0.644 −8.273 0.000 ***
The effect of LCC operation is positive and similar to those pre-
Log (ER) −0.399 0.987 −5.234 0.000 ***
Log (EC) −3.667 0.025 ** −6.695 0.000 *** viously found, which confirm the robustness of our findings. Also, si-
milar findings about the presence of European Institutions are reported,
Source: Authors' own elaboration. with a positive and significant effect for business travellers and a non-
Note: Results refer to Test Statistics of ADF test including trend term in re- significant one for leisure travellers. As expected, in the overall model
gression. The AIC was used to determine the lag lengths. Significance level: (column 1), increased income in the tourist's home country has a po-
***p < 0.01, **p < 0.05, *p < 0.1. sitive impact on the growth of overnight stays, whereas an increase of
prices and exchange rate both have a negative effect. This suggests that
travellers are more sensitive to LCC operation than business travellers. when the tourists' income increases, and prices decrease, leading to
Nevertheless, when the variable measuring the concentration of Eur- higher purchasing power, tourism flows to Brussels increase, which is in
opean institutions is added to the previous models (column 4 in line with findings in the literature. Also, any positive change in the
Table 5), we observe a significant increase in the coefficient value of exchange rate indicator meaning that the value of euro increases and
LCC, even after controlling for any bias resulting for multi-collinearity tourists need more currency to buy one euro, has a negative effect on
between variables (Table B1 – Appendix B). This change is especially tourism demand because they lose purchasing power, since travel ex-
observed for business stays (column 5) and in the overall model penditure expressed in national currency increases.
(column 4), suggesting that the presence of European institutions in- Interestingly, when a distinction is made according to the purpose of
creases the relevance of LCC operations for tourism demand. The the stay (columns 2 and 3), tourism demand shows different behavior in
finding reported is particularly interesting, because it reveals that the relation to economic factors. The only significant economic factor for
effect of LCC share is higher for business travellers than for leisure one, business travellers is income and for leisure travellers it is the relative
when the singularity of destination country is incorporated in the price index. The exchange rate always appears to be statistically non-
model. Usually, the scientific literature has found an opposite conclu- significant. This conclusion confirms that leisure travellers are more
sion, however, differences in results can be explained by the qualitative sensitive to price change than business ones, as defended by Hess and
attributes of destination country. Actually, existing studies assessing Polak (2005) and Kopsch (2012). Furthermore, once income (Y) is
differences between business and leisure travellers behaviour (e.g. measured by GDP per capita this variable also reflects trends in eco-
Martínez-Garcia et al., 2012) are mainly focused on regions where nomic growth in the tourists' home country in comparison with the
leisure is the main motivation of the travel. Belgian economy, explaining the positive effect on tourism demand for
As regards the effect of European institutions on tourism demand, business purpose. Actually, in period of economic growth, foreign
this has a positive impact on the overall model for tourism demand and businessman show a higher propensity to invest outside their home

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A. Santos, M. Cincera Journal of Transport Geography 73 (2018) 163–171

Table 5
Results of log-log regression: Eqs. (3) and (4).
Variables Results Eq. (3) Results Eq. (4)

ΔLog (DT - TT) ΔLog (DT - BUS) ΔLog (DT - LEIS) ΔLog (DT - TT) ΔLog (DT - BUS) ΔLog (DT - LEIS)

(1) (2) (3) (4) (5) (6)

ΔLog (LCC) in “t” 0.0811** 0.0887* 0.142*** 0.139*** 0.169*** 0.148***

(0.0319) (0.0493) (0.0407) (0.0314) (0.0374) (0.0442)
ΔLog (EC) in “t-2” – – – 0.193*** 0.243*** 0.0743
– – – (0.0674) (0.0848) (0.0870)
Year dummy YES YES YES YES YES YES
Seasonal dummy YES YES YES YES YES YES
Constant −0.168*** −0.126*** −0.232*** −0.177*** −0.138*** −0.238***
(0.0130) (0.0154) (0.0188) (0.0102) (0.0128) (0.0189)
Observations 63 63 63 62 62 62
R-squared 0.921 0.866 0.937 0.924 0.876 0.936
Wald test
H0: all coefficient = 0 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Functional form
H0: there is no specification error 0.999 0.395 0.971 0.664 0.417 0.755

Source: Authors' own elaboration.

Note: Robust standard errors in parentheses. Significance level: ***p < 0.01, **p < 0.05, *p < 0.1. Δ is first difference operator. Seasonal dummy refers to
quarterly dummies and year dummies to the main important events affecting tourism demand in Brussels. Results of Wald and functional form tests refer to p-value.

Table 6 spent on tourism accommodation in Brussels and the set of explanatory

Results of log-log regression: Eq. (2). variables included both economic and non-economic factors high-
Variables ΔLog (DT - TT) ΔLog (DT - ΔLog (DT -
lighted in the literature, such as income, prices, exchange rate, the
BUS) LEIS) share of LCC (proxy for the cost of transportation) and qualitative at-
tributes.
(1) (2) (3) The results reported that an increase of 10% in the growth of the
ΔLog (LCC) in “t” 0.133*** 0.172*** 0.134***
LCC market share leads to an increase of between 1.3% and 1.7% in the
(0.0338) (0.0393) (0.0431) growth of tourism demand. The magnitude of this impact is in the range
ΔLog (Y) in “t-1” 2.189* 3.771** 0.0368 of values found by Tsui (2017) for domestic guest nights in New
(1.247) (1.505) (2.543) Zealand.
ΔLog (RP) in “t-1” −3.271** −0.827 −5.096*
Furthermore, the study demonstrated that LCC per se have a smaller
(1.609) (2.145) (2.767)
ΔLog (ER) in “t-1” −0.448* −0.455 −0.322 positive effect on tourism demand for business purpose compared to the
(0.254) (0.311) (0.377) effects of the specific characteristics of Brussels as a destination. The
ΔLog (EC) in “t-2” 0.201*** 0.264*** 0.0664 presence of European institutions complements the higher availability
(0.0682) (0.0766) (0.0950) of low air fares. Additionally, the size of these institutions only has a
Year dummy YES YES YES
Seasonal dummy YES YES YES
positive effect on stays for business purposes. No significant effect was
Constant −0.175*** −0.143*** −0.228*** shown on leisure tourism. Since the presence of European institutions
(0.0122) (0.0119) (0.0251) attracts citizens from other countries for meetings and conferences,
Observations 62 62 62 with leisure in a secondary position, it is logical to find only a sig-
R-squared 0.934 0.894 0.940
nificant effect on business travel.
Wald test
H0: all coefficient = 0 0.0000 0.0000 0.0000 Globally, all economic factors leading to a reduction in purchasing
Functional form power are shown to decrease tourism demand, in line with the litera-
H0: there is no 0.8830 0.1610 0.9780 ture. Nevertheless, there are some differences in the importance of
specification error economic factors depending on the purpose of the stay. For business
travellers, GDP per capita, a proxy for income, is the most important for
Source: Authors' own elaboration.
Note: Robust standard errors in parentheses. Significance level: ***p < 0.01, travel demand, whereas for leisure tourists the main significant factor is
**p < 0.05, *p < 0.1. Δ is first difference operator. Seasonal dummy refers to the relative price index.
quarterly dummies and year dummies to the main important events affecting The conclusions of this study are particularly relevant for the field of
tourism demand in Brussels. Results of Wald and functional form tests refer to p- transport geography, since they describe and explain how the intensity
value. of passengers travelling on LCC to Brussels seems not to have much to
do with the unique European institutional dimensions as measured
country (Iamsiraroj, 2016), which could be associated with more tra- here. Further investigation of tourist travel will require investigation of
vels to destinations abroad. some more sensitive measures of the broader cultural “character” of
Brussels which may need to draw upon interviews with tourists. This
approach may also need to consider that tourist travel may fact be as-
6. Discussion and conclusion sociated with another commonly identified reason for travel which is
“visiting friends and relations”. Here it is possible that changes in the
Using quarterly data from 2000 to 2015, the paper assesses the ef- ethnic and cultural mix of Brussels could be a factor, which may be tied
fect of LCC on tourism demand focusing on the case study of Brussels. to the fact that international visitors are coming from a wider array of
The peculiarity of Brussels comes from the high concentration of destinations now than in the past.
European and International institutions with their headquarters or a
branch in the city, which make it a very interesting and singular case
for research. Tourism demand is measured by the number of nights

169
A. Santos, M. Cincera Journal of Transport Geography 73 (2018) 163–171

Acknowledgment Flanders), DG Human Resources & Security in the European

Commission, Brussels Airport Company and Brussels South Charleroi
The authors are grateful to Dr. Frédéric Dobruszkes from Université Airport for the statistical data provided.
libre de Bruxelles, to Prof. Kevin O'Connor from University of
Melbourne and to two anonymous referees for their valuable comments Declarations of interest
and suggestions. The authors also thank Observatoire du Tourisme à
Bruxelles (Tourism of Brussels), Toerisme Vlaanderen (Tourism of None.

Appendix A. Descriptive statistics

Table A.1
Mean, standard deviation, minimum and maximum.

Variable Name Mean Std. Dev. Min Max

DT – TT 1,300.13 247.46 916.77 1,907.00

DT – BUS 728.67 100.35 563.78 999.00
DT – LEIS 571.46 167.92 278.83 951.00
LCC 0.18 0.11 0.01 0.37
Y 38,091.83 1,138.41 35,674.55 40,041.86
RP 1.00 0.01 0.99 1.01
ER 0.91 0.13 0.69 1.12
EC 0.04 0.00 0.03 0.05
NY_Sabena 0.06 0.24 0 1
Palais 0.44 0.50 0 1
Crisis 0.13 0.33 0 1
Paris 0.06 0.24 0 1
Source: Authors' own elaboration.
Note: Number of observations = 64.

Appendix B. Multicollinearity diagnostic

Table B.1
Correlation matrix.

# Variables VIF Correlation matrix

1 2 3 4 5

1 ΔLog (LCC) 1.17 1.000

2 ΔLog (Y) 1.11 0.004 1.000
3 ΔLog (RP) 1.25 −0.115 0.232 1.000
4 ΔLog (ER) 1.21 0.000 −0.243 −0.375 1.000
5 L.ΔLog (EC) 1.24 −0.378 −0.074 0.215 −0.105 1.000
Source: Authors' own elaboration.
Note: Number of observations = 62. Δ is first difference operator. L means that variable is lagged one period. VIF corresponds to the variance inflation factor and
values higher than 10 reveal evidence of collinearity (Baum, 2006). Once the results on Table B.1. show that the maximum VIF is less than 2, no evidence of
collinearity is found.

Appendix C. Testing estimators' properties

Table C.1
Testing estimators' properties.

BLUE Assumption ΔLog (DT - TT) ΔLog (DT - BUS) ΔLog (DT - LEIS)

Results of model estimation in Table 5

(1) (4) (2) (5) (3) (6)

Breusch-Godfrey LM test for serial correlation

Ho: no serial correlation 0.2603 0.525 0.0302 0.1681 0.3376 0.4424
Breusch-Pagan/Cook-Weisberg test for heteroskedasticity
Ho: Constant variance 0.3057 0.8299 0.3786 0.2439 0.9955 0.8326
Mean of error term 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

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A. Santos, M. Cincera
BLUE Assumption
Breusch-Godfrey LM test for serial correlation
H0: no serial correlation
Breusch-Pagan/Cook-Weisberg test for heteroskedasticity
H0: Constant variance
Mean of error term
Source: Authors' own elaboration.
Note: Except for mean of error term, results refer to p-value of statistic test. Tests are made based on standard errors estimation.
Results show that the three assumptions of the Gauss-Markov theorem (no heteroscedasticity, no serial correlation and mean error equal zero) are satisfied, except for
the model in column (2) from Table 5. To test whether serial correlation issues bias the results, we also estimated a Prais–Winsten regression model, which uses the
generalized least-squares method to estimate the parameters in a linear regression model in which the errors are serially correlated, and the findings are similar to the
findings with an OLS (results available on request).
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